Traders on the NYSE floor, July 12, 2022.
Source: NYSE
US stock futures were little changed Sunday night after last week’s broad-based rally propelled the S&P 500 to its best week since March and the highest since last August.
Futures linked to the Dow Jones Industrial Average gained 12 points. S&P 500 futures fell 0.1% and Nasdaq 100 futures fell 0.3%.
Oil prices briefly rose more than 2% after Saudi Arabia said it would cut production further by 1 million barrels a day from July. The news followed a meeting between OPEC and its allies, where the group decided to stick with existing production targets for 2023. The rise in crude oil prices eased on Sunday evening, with futures on Brent and US West Texas Intermediate last trading about 1% higher.
On Friday, stocks rallied into the weekend after strong May jobs data. The Dow jumped 701.19 points, or 2.12%, for its best day since January and ended the week at 33,762.76. The S&P 500 rose 1.45% to 4,282.37, while the Nasdaq Composite climbed 1.07% to 13,240.77, posting its sixth straight weekly gain.
Over the weekend, President Joe Biden signed into law the debt ceiling bill, averting a potentially catastrophic US government default.
Investor sentiment was high on Friday after the Labor Department reported overwhelming nonfarm payrolls growth in May. The number of employees in the public and private sectors rose by 339,000 in May, compared to the Dow Jones estimate of 190,000, the average hourly wage increased at an annual rate of 4.3%, slightly less than economists had expected, and the average working week dropped by a fraction. The report allayed concerns about an impending recession.
“Despite the rising body of leading indicators pointing to an imminent recession, ongoing strength in the labor market and stubborn consumer spending are delaying the start even further,” said Mace McCain, chief investment officer at Frost Investment Advisors.
“We don’t think the economy can slide into recession until employment falls significantly,” he added. “Since the 1950s, the unemployment rate has skyrocketed with every drop in job vacancies [has] will happen in this cycle. This trend could continue and thus delay the recession.”
Additionally, investors are focused on what has been a proven narrow stock market rally so far in 2023, led by just a handful of technology stocks that have carried the rest of the market, and whether there could be a medium-term correction, if the breadth does not improve.
“The big question is whether the breadth can continue to improve, which could breathe new life into what has been a very narrow rally so far,” Yung-Yu Ma, chief investment strategist at BMO, told CNBC.
“Recent developments in the banking sector are also encouraging and repeated signs of labor market strength reduce the risk of negative outcomes. Monday’s services PMI reading and factory orders could help reinforce the positive narrative,” he added.
After an intensive month with the results of the first quarter, the balance sheet in the coming week is much more relaxed. Investors get insight into food prices and demand from JM Smucker, Campbell Soup and United Natural Foods. Stitch Fix, Signet Jewelers and DocuSign are also expected to report results.
On the economic data side, traders on Monday will get May PMI data from the Institute for Supply Management and S&P Global, as well as April factory orders and durable goods. On Wednesday, the Mortgage Bankers Association will release its latest data on home loan applications.
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