While signs in Washington are pointing to an eventual agreement on raising the country’s debt ceiling, Wall Street believes that the euphoria over such an agreement may have already set in or will increase in the four trading days of the coming week commencing on the holidays are shortened, as will prove short-lived. Once the immediate euphoria surrounding Nvidia’s stunning second-quarter guidance and buzz about all things artificial intelligence fades, attention will turn to May’s non-farm payrolls numbers next Friday (the Dow Jones estimate puts it at 188,000 new). jobs), the next Federal Reserve monetary policy meeting on June 13-14, and the nagging fact that so many stocks are not going public. The latest fear in trading rooms is that the economy has proved so resilient of late and inflation has been slow to come down that the Fed could hike rates by another quarter-point, if not at the June meeting then at the following meeting on July 25th and 26th. The Atlanta Fed’s GDPNow model estimate for second-quarter real gross domestic product growth was last seen at 1.9%, while the CME FedWatch tool late Friday showed a nearly 67 percent chance the Fed would hike another quarter-point in June and raise interest rates to between 5.25% and 5.50%. According to the CME, there’s even a 25 percent chance that the rate will be between 5.50 percent and 5.75 percent by the end of the July meeting. Some of this movement may be related to sentiment surrounding the debt ceiling discussions. What’s more, June is usually a lousy month for stocks anyway, regardless of the machinations in Washington or the prophecies of the Fed tea leaves. “The reason June is typically a weak market is that we are in first quarter earnings season, which means companies are relatively quiet, leaving investors dependent on mostly political news that typically pose a risk to the market.” said Jay Hatfield, CEO of Infrastructure Capital Management. “The overhangs in the market this year [are] the debt ceiling negotiations, hawkish comments from the Fed and a banking crisis. It looks like we’ll agree on a debt ceiling over the weekend, which should help stabilize the market.” The problem for many on the road is the performance of the S&P 500 Tech Index, which is up more than 5 % increased ; the Nasdaq Composite, which gained about 2.5%; and the S&P 500, up 0.3%, hides so much weakness beneath the surface. The S&P 500 consumer staples, materials, health care and utilities were all down between 2.4% and 3.2% this week, and the Dow Industrials was down 1%. Though the S&P 500 is up 9.5% so far in 2023, few stocks are doing well. “The moving average has been declining since mid-April,” wrote Liz Young, SoFi’s head of investment strategy, in a blog post on Thursday . “Despite the market’s upside over the last month and the changes, the strength beneath the surface has actually deteriorated.” And all this at a time of year when stocks are experiencing a seasonally difficult time. “Historical performance.” [in June] was lukewarm [the] “DJIA and S&P 500,” Christopher Mistal of the Stock Trader’s Almanac wrote this week, though he noted that performance tended to be stronger in years like this, before the presidential election years. Yet, historically, June only ranks first The 11th strongest month of the year for the Dow Industrials, ninth strongest for the S&P 500 and Russell 1000, and seventh strongest for the Russell 2000. “The ‘summer rally’ is the weakest most years Rally of all four seasons.”, says the almanac. Unfortunately, the market backdrop remains “cautious and continues to set for further sideways movement and a likely pullback or correction over the sluggish summer months, particularly after mid-July in the worst two months of the year – August and September,” wrote the Almanac’s editor-in-chief, Jeffrey Hirsch, on Thursday. Week-Ahead Calendar Tuesday 9:00 am: S&P/Case-Shiller Home Price Index (March) 10:00 am: Consumer Confidence (May) Results: HP Inc., Hewlett Packard Enterprise Wednesday 8:45 am: Fed- Gov. Michelle Bowman speaks 9:45 am Chicago PMI (May) 10 am JOLTS (April) 1:30 pm Fed Governor Philip Jefferson speaks 1:30 pm Philadelphia Fed Chairman Patrick Harker speaks on earnings: Advance Auto Parts , Salesforce, NetApp, Raymond James, Donaldson, Capri Holdings, Nordstrom, PVH Corp., CrowdStrike, Octa Thursday 8:15 a.m.: ADP Payroll Report (May) 8:30 a.m.: Initial Claims (week ended May 27) 9 :45 am: S&P Global Manufacturing PMI (May) 10 am: ISM Manufacturing (May) 1 pm: Fed’s Harker Talks Earnings: Dollar General, Broadcom, Cooper Companies, Paychex, Macy’s, Five Below, C3.ai, Lululemon, Zumiez Friday 8:30 am: US Jobs Report (May) – Centre County Report’s Samantha Subin, Fred Imbert and Michael Bloom contributed to this report.
