Wall Street On Backfoot As Traders Sweat Over Key Inflation Data: Economist Warns Stock Rally May Stumble If Bond Yield Crosses This Level

U.S. stocks are likely to remain weak on Thursday, major index futures indicated, as lower bond yields stayed elevated and mixed earnings dampened sentiment. On traders’ radar are key inflation data from the Federal Reserve, as well as jobs data and a revised quarterly GDP report besides a speech from a central bank official.

Futures	Performance (+/-)
Nasdaq 100	-0.28%
S&P 500	-0.37%
Dow	-0.92%
R2K	-0.01%

In premarket trading on Thursday, the SPDR S&P 500 ETF Trust SPY declined 0.43% to $523.85, and the Invesco QQQ ETF QQQ traded down 0.32% at $455, according to Benzinga Pro data.

Cues From Previous Session

Rising bond yields proved to be the undoing of the market on Wednesday, as the major indices closed uniformly lower. The averages opened down as the benchmark U.S. 10-year Treasury yield hovered above the 4.6% level. The indices moved sideways around these depressed levels before ending notably lower.

The Dow Jones Industrials Average closed at its lowest since early May and the broader S&P 500 Index retreated to a two-week low.

The sell-off was across the board, with the weakness more pronounced in energy, industrial, real estate, material and utility stocks.

Index	Performance (+/-)	Value
Nasdaq Composite	-0.58%	16,920.58
S&P 500 Index	-0.74%	5,266.95
Dow Industrials	-1.06%	38,441.54
Russell 2000	-1.48%	2,036.19

Insights From Analysts:

Carson Group’s Ryan Detrick is optimistic about the rally returning. To make his case, he noted that typically after a 5% gain in May, the market rises yet again in June five out of six times. The last three times which saw a 5%+ gain in May saw at least double-digit gains for the year.

The S&P 500 is up about 5% in May with two full days to go. I'm probably jinxing it, but here goes.

After a 5% gain in May, June has been higher 5 out of 6 times and the past three times the rest of the year added at least double digits. pic.twitter.com/TKx7TJmZza

— Ryan Detrick, CMT (@RyanDetrick) May 29, 2024

Economist David Rosenberg, meanwhile, flagged a potential danger signal. The U.S. 10-year Treasury note has strong resistance at the 4.62% level but if the yield breaks above this level and returns to 5%, there could be a sell-off, he suggested.

“Break higher could set us up for a return to 5%. Equities won't like that one bit,” he said.

Upcoming Economic Data:

• The Labor Department is scheduled to release the customary weekly jobless claims data at 8:30 a.m. EDT. Economists, on average, expect the number of individuals claiming unemployment benefits to come in at 218,000 for the week ended May 25, up from 215,000 in the previous reporting week.
• The Bureau of Economic Analysis will release the preliminary first-quarter GDP report at 8:30 a.m. EDT. The consensus estimates call for a downward revision to the annualized quarter-over-quarter from 1.6% to 1.2%. Traders may also keep a close eye on the GDP deflator and the annual rate of consumer personal consumption expenditure index – which are measures of inflation.
• The National Association of Realtors is due to release the pending home sales report for April at 10 a.m. EDT. Economists, on average, model a 0.4% month-over-month decline in pending home sales, reversing some of the 3.4% increase in March.
• The Energy Information Administration will release its weekly petroleum status report at 11 a.m. EDT.
• The Treasury will auction four- and eight-week auctions at 11:30 a.m. EDT.
• New York Fed President John Williams is scheduled to speak at 12:05 p.m. EDT.
• Dallas Fed President Lorie Logan will speak at 5 p.m. EDT.

See Also: Best Apps For Trading Futures

Stocks In Focus:

• Agilent Technologies, Inc. A fell over 13% in premarket trading following the instrumentation company’s earnings release.
• Other stocks moving on earnings are C3.ai, Inc. AI (up over 14.5%), HP Inc. HPQ (up about 5.8%), Okta, Inc. OKTA (up over 5.5%), Nutanix, Inc. NTNX (down over 11.7%), Pure Storage, Inc. PSTG (up about 10%), Salesforce, Inc. CRM *(down about 16%), UiPath Inc. PATH (down over 30%) and nCino, Inc. NCNO (down about 6.5%).
• Best Buy Co., Inc. BBY, Kohl’s Corporation KSS, Burlington Stores, Inc. BURL, Dollar General Corporation DG, Foot Locker, Inc. FL and Hormel Foods Corporation HRL are among the notable companies reporting before the market open.
• Those reporting after the close are Ambarella, Inc. AMBA, Asana, Inc. ASAN,  Cooper Companies, Inc. COO, Costco Wholesale Corporation COST, Dell Technologies Inc. DELL, Gap, Inc. GPS, Guess?, Inc. GES, Marvell Technology, Inc. MRVL, MongoDB, Inc. MDB, NetApp, Inc. NTAP, Nordstrom, Inc. JWN, PagerDuty, Inc. PD, SentinelOne, Inc. S, Ulta Beauty, Inc. ULTA and Zscaler, Inc. ZS.
• Palantir Technologies, Inc. PLTR climbed over 2% on a contract win.

Commodities, Bonds And Global Equity Markets:

Crude oil futures extended their slide and traded under $79-a-barrel and gold futures continued to move sideways well below the $2,400 mark. The 10-year Treasury yield edged down slightly to 4.594%. Bitcoin BTC/USD traded nearly flat under $68k.

Wall Street’s weakness weighed down on Asian stocks, with the major markets in the region settling sharply lower, while European stocks posted uneasy gains in early trading.

Read Next: Fed Beige Book Shows Modest Economic Expansion Ahead Of Key GDP, Inflation Data Release

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