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U.S. stocks are poised to start Monday’s session in the red as traders brace for the all-important decision from the Federal Reserve’s monetary policy committee on Wednesday and the May inflation report ahead of the rate decision. Although the futures market has factored in a Fed pause, rate cuts announced by two G7 central banks last week have increased hopes of a dovish message from their U.S. counterpart. Given the paucity of data and the overbought levels, the market may most likely tread water before taking a meaningful move on either side.
| Futures | Performance (+/-) |
| Nasdaq 100 | -0.08% |
| S&P 500 | -0.15% |
| Dow | -0.21% |
| R2K | -0.80% |
Cues From Previous Week:
Wall Street posted weekly gain in the week ended June 7 as traders cheered data showing a loss of momentum in the jobs market, which is widely considered a precursor for Fed rate cuts. The Nasdaq Composite and the S&P 500 notched up intraday and closing highs on Wednesday before giving back some gains over the remaining two sessions. Nonetheless, the S&P 500 posted a fresh intraday high on Friday but ended off its Wednesday closing high.
| Index | Week’s Performance (+/-) | Value |
| Nasdaq Composite | +2.38% | 17,133.13 |
| S&P 500 Index | +1.32% | 5,346.99 |
| Dow Industrials | +0.29% | 38,798.99 |
| Russell 2000 | -2.11% | 2,026.55 |
Insights From Analysts:
The broader equity market rally seen this year is impressive, given last year's strength and tempered expectations concerning rate cuts, said Comerica Chief Investment Officer John Lynch in his “Mid-Year Market Outlook” report. Investors have switched their optimism to artificial intelligence, expecting it to unlock a new era of productive economic growth and higher corporate profitability, he said.
That said, he noted that the gains have become more concentrated in a group now known as the “Fab Five.”
Technical indicators suggest the market has more room to run, Lynch said. “Considering that the S&P 500 traded within the range of 4,950 to 5,250 over the past several months, the Index's recent breakout above that band now suggests that an upside technical target of 5,550 is possible in the coming months,” he said. That said, the analyst cautioned that the target is attainable only with help from a few catalysts.
“Equity market fundamentals suggest that the upside technical target may be difficult to sustain, though, without improved support from a combination of interest rates, earnings, and valuation,” he said.
Fund Strat’s Tom Lee said in an X post that people who sat out May’s 5% rally will likely be looking to re-enter the market, hoping for a reentry. “This is essentially #FOMO,” he said. He flagged the possibility of gains this week, courtesy of the CPI report and the Fed decision. Also, historically 70% of the time the market rallies in the week after the jobs report, especially if it is a soft report, he said.
Upcoming Economic Data:
The economic calendar of the week is very light, with the June Fed decision and the May inflation data among the widely-watched events. Traders may also focus on the May producer price inflation report and the customary weekly jobless data, both due on Thursday, and the results of the University of Michigan’s preliminary consumer sentiment for June.
On Monday, the Treasury will auction three- and six-month bills at 11:30 a.m. EDT and three-year notes at 1 p.m. EDT.
See Also: How To Trade Futures
Stocks In Focus:
Commodities, Bonds And Global Equity Markets:
Crude oil futures are little changed above the $75-a-barrel level following last week’s strong gains, and gold futures are trading week around the $2,314 mark. The 10-year note yielded 4.463%, up 3.4 basis points, ahead of the week’s key events.
Bitcoin (CRYPTO: BTC) was flat near the $69,000 level.
Most Asian markets that were open on Monday ended lower, tracking the lackluster sentiment on Wall Street on Friday and looking ahead to the U.S. Fed rate decision. The Japanese market bucked the downtrend as traders digested the revised first-quarter GDP data. GDP fell an annualized 1.8% in the first quarter, not as worse as the 2% contraction estimated in the preliminary report. The Chinese, Hong Kong, and Australian markets remained closed for public holidays.
European stocks traded sharply lower in early trading, led by the French market after Prime Minister Emmanuel Macron said he would call for a snap poll.
Image via Shutterstock
