Nasdaq, S&P 500 Futures Climb After Volatile Week As Traders Eye Inflation Data and Retail Earnings: Strategist Says Not CPI But This Data Can Give People Lot Of Conviction

Author: Shanthi Rexaline | August 12, 2024 07:31am

The resilience of the market was in full display on Monday after last week’s “historical comeback” by the market. The major index futures traded higher, albeit by a modest magnitude. The yen weakened amid a stock market holiday in Japan and this should serve to keep the carry trade unwinding fears in check. That said, geopolitical tensions perked up after Iran-backed Lebanese paramilitary group Hezbollah launched rocket attacks on Israel amid an Iranian threat to take on the Jewish nation.

Domestically, traders may look to exercise restraint ahead of two inflation reports, due Tuesday and Wednesday, and key retail earnings reports from companies such as Home Depot, Inc. (NYSE:HD) and Walmart, Inc. (NYSE:WMT). The CBOE Volatility Index, widely called as VIX, rose slightly but held below the 21 level.

Futures	Performance (+/-)
Nasdaq 100	+0.25%
S&P 500	+0.17%
Dow	+0.06%
R2K	-0.43%

Cues From Last Week:

The major U.S. averages extended their weekly losses, despite a fairly-tale comeback from Monday’s plunge, they ended marginally lower. The S&P 500 Index, the broader market gauge, gyrated between a low and high of 5,119.26 and 5.358.67, respectively, during the week, underlining the volatility the market experienced in the week ended Aug. 9.

The VIX spiked to a high of 65.73 – a level not seen since March 2020 in the aftermath of the COVID-19 pandemic, before retracing all of that upward move and ending lower for the week.

A sharp plunge in Japanese stocks last Monday due to the unwinding of the yen carry trades amid the Japanese currency’s strengthening proved contagious and plunged the global markets into a sea of red, and Wall Street was no exception. The U.S. stocks see-sawed through the first half of the week as they reacted to earnings news and economic data before coming back up strongly on Thursday and Friday. A report showing a sharp fall in weekly jobless claims helped bring some sanity back to the market.

Index	Week’s Performance (+/)	Value
Nasdaq Composite	-0.18%	16,745.30
S&P 500 Index	0.05%	5,344.16
Dow Industrials	-0.06%	39,497.54
Russell 2000	-1.35%	2,080.92

Insights From Analysts:

Citing VIX’s plunge to 20, Tom Lee, Head of Research, Fund Strat, said the worst of the panic is now behind. But he cautioned that there could be ripple effects, given there is some nervousness around Iran and how much of this yen carry trade has to unwind, he said while appearing on CNBC’s Last Call. If the upcoming week’s jobless claims come in benign, then that would quell the growth scare and give people a lot of conviction, he said.

If the yen carry trades unwind in an orderly fashion, Lee said it may not hurt the market much.

Upcoming Economic Data:

The unfolding week’s economic calendar is more back-end loaded, with the July consumer and producer inflation reports, the July retail sales data, two August regional manufacturing activity data, the July industrial production report, and the University of Michigan’s preliminary consumer sentiment reading for August, all likely to be on investors’ radar.

• On Monday at 11 a.m. EDT, the New York Federal Reserve will release its inflation expectations readings for July. In June, the one-year inflation expectation was at 3%.
• The Treasury will auction three- and six-month bills at 11:30 a.m. EDT.
• The Treasury will release the monthly federal budget at 2 p.m. EDT. The budgetary balance for July is expected to show a deficit of $254.3 billion, wider than the deficit of $66 billion in June.

See Also: How To Trade Futures

Stocks In Focus:

• Shares of regional lender KeyCorp (NYSE:KEY) rose about 15% after Canada’s Scotiabank announced the purchase of a minority stake in the U.S. bank in an all-stock deal worth $2.8 billion. 
• Hawaiian Electric Industries, Inc. (NYSE:HE) fell over 10% after raising a going concern warning, citing the impact of the Maui wildfire settlement financing.
• Ballard Power Systems Inc. (NASDAQ:BLDP), Barrick Gold Corporation (NYSE:GOLD), and Monday.com Ltd. (NASDAQ:MNDY) are among the notable companies reporting ahead of the market opening. Alcon Inc. (NASDAQ:ALC) is due to report after the close.

Commodities, Bonds And Global Equity Markets:

WTI-grade crude futures climbed over 1% to $77.5+ a barrel on Monday, and gold futures rose modestly as they approached the $2,500 level. The 10-year Treasury note yielded 3.955%, up 1.3 basis points. Bitcoin (CRYPTO: BTC) traded under $59K as it pulled back more than 3% over the past 24 hours amid geopolitical tensions.

Most Asian markets advanced on Monday, led by the South Korean and Taiwanese markets, while the Chinese, Indian, and Singaporean markets settled lower. The Japanese market remained closed on account of a public holiday.

European stocks traded mixed in early trading at the start of the week.

Read Next:

• Economist Pours Cold Water On September Rate Cut: ‘We Need To See Some Sustained Weakness’

Photo courtesy: Shutterstock

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