Nasdaq, S&P 500 Futures Waver As Home Depot Sags And PPI Report Awaited: Analyst Says 'Insufficient Technical Evidence' That Bottom Has Been Set

Wall Street is priming for a positive start on Tuesday, as the market resiliently holds onto optimism regarding receiving benign inflation data, which will likely seal the fate of a rate cut. The producer price inflation data due ahead of the market opening is likely to show further easing in pricing pressure at the wholesale level, potentially serving as a harbinger of tame consumer price inflation data.

Home Depot, Inc.’s HD weak guidance is likely to weigh down on the retail space as most of these companies are lined up to release their earnings over the next couple of weeks. Volatility is in check, as evidenced by the CBOE Volatility Index, aka VIX, which traded below the 22 level. The yen was weaker against the dollar, potentially keeping at bay fears concerning additional unwinding of carry trades.

Futures	Performance (+/-)
Nasdaq 100	+0.10%
S&P 500	+0.04%
Dow	-0.22%
R2K	-0.42%

Cues From Last Session:

U.S. stocks ended Monday’s session on a mixed note as trading was characterized by listlessness following the strong gains recorded in the latter-half of last week. Traders also chose to exercise restraint ahead of key retail earnings and the twin inflation report. Nvidia Corp. NVDA rallied amid positive commentary by sell-side analysts, providing a lift to semiconductor stocks.

Among the S&P 500 sectors, IT, energy, and utility stocks gained ground, while all the other eight sectors closed in the red.

Index	Performance (+/)	Value
Nasdaq Composite	+0.21%	16,780.61
S&P 500 Index	+0.00%	5,344.39
Dow Industrials	-0.36%	39,357.01
Russell 2000	-0.91%	2,062.08

Insights From Analysts:

Even as the market bounced back nicely after catering early last week, it is too early to call a bottom, according to LPL Financial Chief Technical Strategist Adam Turnquist. In a note to clients, the strategist said bottoming is historically a process. “Although we welcome the recent bounce, there is insufficient technical evidence supporting the case that a durable low has been set,” he said.

Among the potential catalysts for a stock market turnaround are a signal from the Federal Reserve that they will be more aggressive with rate cuts, evidence that the economy is holding up okay, especially the labor market, and increased stability in currency markets, he said.

From a technical analysis perspective, Turnquist sees downside risk to key support near the 200-dma (5,032) or the April lows (4,954) under an adverse scenario.

“Overall, we expect volatility to remain elevated in the coming months as the market waits for more clarity on the economy and a better seasonal setup,” he said, adding that September is the worst month for stocks.

Wharton professor and WisdomTree Chief Economist Jeremy Siegel said in his weekly commentary that he expects to see resilience in dividend-paying stocks if the Fed lowers rates and the economy slows. “I am closely monitoring the real data, and fully expect Jay Powell to tee-up a rate cut in his speech at the Jackson Hole Economic Symposium later this month,” he said.

“The upcoming weeks, especially with the inflation data release and the Fed's meeting at Jackson Hole, will be crucial to see if the Fed understands the moment at hand.”

Upcoming Economic Data:

• The Bureau of Labor Statistics will release the producer price inflation report for July at 8:30 a.m. EDT. Economists, on average, expect both producer prices and core readings to show 0.2% month-over-month growth. This compares to June readings of 0.2% and 0.4% increases, respectively. The annual producer price inflation and core inflation rate are expected at 2.3% and 2.7%, respectively, down from 2.6% and 3%.
• Federal Open Market Committee member and Atlanta Fed President Raphael Bostic is scheduled to speak at 1:15 p.m. EDT.

See also: Best Futures Trading Software

Stocks In Focus:

• Home Depot fell over 4.5% in premarket trading following the home improvement retailer’s guidance cut, citing the economy.
• Tencent Music Entertainment Group TME fell over 7% following the company’s earnings announcement and Sea Limited SE pulled back over 3.5%, while Paysafe Limited PSFE rose about 6%.
• Viasat, Inc. VSAT slumped about 10% after the company announced an offering.

Commodities, Bonds And Global Equity Markets:

Crude oil futures pulled back after Monday’s 4%+ advance and gold futures are little changed just above the $2,500 mark. The 10-year Treasury noted yield remained unchanged at 3.909%. Bitcoin BTC/USD traded up over 0.50% above the $58.5K mark.

The Asian markets were led higher by Japan, with the Nikkei 225 average ending up 3.45% on Tuesday, thereby returning to levels seen before last Monday’s crash. On the other hand, European stocks are showing apprehension as traders react to weak German data and an unexpected fall in U.K. jobless claims.

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