Markets remained relatively unchanged on Tuesday with the S&P 500 and Nasdaq Composite up 0.2%. Investors are waiting for a compelling reason to move in one direction or another following the completion of earnings season. Interest rates have been moving lower since the release of the PCE Index, with the fewest job openings in over three years according to the JOLTs report. Rates on the 10-year note have fallen to 4.33% from a recent high of 4.74% in April.
Upcoming economic data scheduled for release includes the ADP report on employment, Services PMI, and ISM Non-Manufacturing. Investors are closely monitoring economic reports for signs of corporate growth as stocks are trading at a premium. Three potential scenarios with respect to economic data include in line or slightly weaker data being a net positive, slightly underperforming data leading to enthusiasm for an interest rate cut, and stronger than expected data risking an interest rate hike.
While the concentration risk of the market remains a concern due to five stocks accounting for 27% of the S&P 500 market cap, the hope is to see the market moving higher on a broad range of stocks. Hewlett Packard Enterprise reported strong earnings and better than expected forecast, leading to a 10% boost in premarket trading. Cybersecurity company CrowdStrike also saw an 11% increase in premarket trading following positive earnings and guidance. The European Central Bank is expected to cut rates for the first time since 2019, leading to higher European stocks.
Oil prices have fallen around 15% since April, relieving some inflationary pressure. The drop in oil prices is seen as a net positive for the economy. June marks a quadruple witching expiration where various options and futures contracts expire, potentially introducing market volatility. Investors are advised to stick with their investing plan and long-term objectives.
Overall, the current outlook is slightly bullish, with a focus on economic data and corporate growth. While some concern remains regarding the market’s concentration risk, positive earnings reports from companies like Hewlett Packard and CrowdStrike are driving market sentiment. The upcoming European Central Bank meeting and the impact of falling oil prices on inflation are also key factors to watch. Investors should stay informed and continue to monitor market trends as they consider their investment strategies.
