Stocks rise on a key report, indicating a co…
The Fed’s favorite PCE price index is showing slower inflation in April, as expected, with signs that earnings may also be slowing.
Photo by Getty Images
Key points to remember
Stock futures rise ahead of positive signals from the Fed’s favorite inflation gauge
A long-term perspective can help put recent volatility in a different light
The Fed’s plan to slow the economy has already hit the housing market
(Friday Market Open) Equity futures gained in premarket action on Friday ahead of a long holiday weekend and behind nearly two months of historic market losses fueled by inflation fears, worries over interest rates and persistent geopolitical tensions. Ahead of the open, investors received good news from a key report that showed inflation may be slowing.
Market potential movers
Investors are looking to wrap up a sixth straight day of market gains in pre-holiday trading after digesting a week of mixed economic news on the state of the homebuyer and retail consumer. Friday’s pre-market news looked like a good start to the weekend – the PCE price index showed core inflation in April rose 4.9% as personal income rose somewhat moderate.
Known as the Federal Reserve’s favorite inflation index for policy matters, the Personal Consumption Core Index numbers were in line with expectations and ended below a 5.2% pace in march. However, the core PCE inflation figures do not include food and energy, two key consumer costs on the rise.
Once the Memorial Day weekend is over, investors may want further evidence from the Conference Board’s monthly consumer confidence survey on Tuesday as to where the economy and the battle plan might go. the Fed.
In premarket trading, S&P 500 futures gained another 0.1% early Friday, while the Dow Jones Industrial Average rose 0.1% and the tech-heavy Nasdaq-100 gained 0. .4%. For the Dow Jones in particular, investors are hoping today’s session will cement the end of a historic eight-week decline. Stocks making the news before the market opens:
- Dell Technologies (DELL) The stock was up more than 9% before the bell after reporting better-than-expected earnings and revenue as business buyers now ramp up purchases of desktops and laptops as offices ramp up reopenings.
- Gap inc. (GPS) shares slid nearly 20% premarket after a big profit loss on Thursday. GPS said its Old Navy division had missed the mark on the merchandise mix for shoppers returning to the office and the impact of inflation on its key low-income customer.
- Costco (COST) shed 1.3% pre-opening despite higher earnings and revenue estimates last quarter, while noting that its margins narrowed nearly 1% due to higher labor costs. labor and transportation.
- hibett (HIBB) slid 6.5% premarket after missing its latest quarterly earnings and sales estimates. HIBB said its buyers have less money to spend now that COVID-19 stimulus payments have ended.
Just before the opening, the Cboe Market Volatility Index (VIX) edged down to 26, still on a cautious level, but closer to a sign of pre-holiday easing.
Market Minutes Review
After a tough month for retailers, the group bounced back a bit on Thursday with better-than-expected forecasts and earnings from a few other big-name stores. The Dow Jones US Retail Index rebounded 4.22%, supported by dollar tree (DLTR) up 21.9%, Macy’s (M), gaining 19.3%, General dollar (DG) up 14%, and Williams Sonoma (WSM) up 12.8%.
Retailers apparently put investors in a bargain-hunting mood because major indexes rallied. The S&P500 (SPX) jumped 1.99%, the Nasdaq Compound ($COMP) increased by 2.68%, and the Dow Jones Industrial Average ($DJI) increased by 1.61%. Investors even turned to small-cap stocks, pushing the Russell 2000 (RUT) 2.17% higher. Growth stocks appeared to be slightly favored over value as S&P 500 Pure Growth Index rebounded 3.14% and the S&P 500 Pure Value Index increased by 1.55%.
Investors favored recently beaten sectors, with consumer discretionary, information technology and financials being the top three gainers, suggesting that many investors view the market as oversold. However, all sectors were up on Thursday except real estate.
Investors also appeared to ignore Thursday’s downward revision to first-quarter gross domestic product (GDP). GDP initially came in at -1.4% and was expected to be revised up yesterday to -1.3% before being revised down to -1.5%. However, that figure is a thing of the past and as of Thursday, the Atlanta Fed’s GDPNow model predicted Q2 GDP at 1.8%.
Three things to watch out for
Perspective: Sometimes it’s easy to forget in the midst of a busy news cycle about inflation, rising rates and potential recessions that the S&P500 (SPX) has been on an uptrend since 2009. The recent pullback has played into bear market returns, but taking a long-term look at the index helps put things into perspective.
Of course, some sectors of the market have been hit much harder, and depending on how you’ve diversified your portfolio, you may feel the pain a little differently. In fact, some have called it the “stealth bear market” because the number of stocks that have lost market cap value isn’t always reflected in major indexes.
Homesick: It’s been a tough week for housing, as economic reports have revealed some cracks in the foundations of the housing market. On Tuesday, the new home sales report unexpectedly fell 16.6%, with the actual number of new homes sold returning to pre-pandemic levels. According to the Commerce Department, nationwide housing inventories fell from six months to nine months.
On Wednesday, we learned that the latest MBA Mortgage Applications report fell again and is now down nine over the past 12 weeks. Mortgage applications are now down 35% from their peak on January 27, 2021.
On Thursday, pending home sales fell 3.9% in April and fell nine in the past 12 months below pre-pandemic levels.
Housing is localized, so national figures don’t always reflect what’s happening where you live. The Fed had hoped to slow the housing market to fight inflation – here are the signs of its success.
Dividends: A new research report from Swiss credit (CS) finds that dividend-paying stocks with the highest payout ratios outperform buybacks. Buybacks have been criticized as a way for companies to inflate their stock prices, but others defend them as a different type of dividend.
However, the report notes that over a 20-year period, by sharing more of their profits as dividends, companies have been able to provide better returns to their investors. Between Dec. 31, 1999, and Dec. 31, 2019, Credit Suisse found that dividend stocks yielded an annual rate of 10.9% compared to buyout stocks at 9.3%. The bottom third of dividend-paying stocks returned 6.6%.
Notable Calendar Items
May 30: Markets closed for Memorial Day
May 31st : Conference Board Consumer Confidence Survey and Revenues from Salesforce.com (CRM), HP (HPQ), and Victoria’s Secret (VSCO)
June 1: ISM Manufacturing Index, JOLTs Job Openings and earnings from Hewlett Packard (HPE), NetApp (NTAP) and Chewy (CHWY)
June 2: Gains from Broadcom (AVGO), Lululemon (LULU) and Hormel Foods (HRL)
June 3: Employment Situation Report, ISM Non-Manufacturing PMI and Earnings from Crowdstrike (CRWD) and DocuSign (DOCU)
Useful educational content and programming
Discover our next Webcasts or view one of our hundreds of archived videos, covering everything from market commentary to the basics of portfolio planning to trading strategies for active investors. You can also deepen your investment know-how with our immersive courses. No matter your level of experience, there is something for everyone.
Looking to stay on top of the markets? Check TD Ameritrade Network, a live program that brings you market news and helps you sharpen your trading knowledge. And for the hottest events of the day, delivered straight to your inbox, you can now subscribe to the daily Market Minute newsletter. here.
TD Ameritrade Network is brought to you by TD Ameritrade Media Productions Company. TD Ameritrade Media Productions Company and TD Ameritrade, Inc. are separate but affiliated subsidiaries of TD Ameritrade Holding Corporation. TD Ameritrade Holding Corporation is a wholly owned subsidiary of The Charles Schwab Corporation. TD Ameritrade Media Productions Company is not a financial adviser, registered investment adviser, futures broker or commission agent.