The stock rally that began in the middle of March appears to have stalled, with investors taking profits on the back of renewed rate concerns following upbeat economic data.
The S&P US Manufacturing and Services PMIs came in above forecasts in April, indicating a resurgence of pricing pressures and pushing U.S. Treasury yields higher on Friday.
The broad market S&P 500 Index traded flat in midday trading on Friday, and is set to conclude the first week in the red after five straight advances.
Fed futures now almost fully discount a 25-basis-point hike in May. Investors assign a 70% likelihood for rates to stay unchanged at 5-5.25% in June. Bets for the first Fed rate cut to occur in September were further trimmed, with markets now assigning a less than 50% probability, according to the latest CME Group Fedwatch tool.
Cues From Friday's Trading:
Stocks traded in a tight range on Friday, as traders digested mixed earnings reports and macro data prints.
Major equity indices opened lower and then attempted a rebound into noon trading.
The S&P 500 Index was marginally weaker, down 0.07%. The tech-heavy Nasdaq 100 eased 0.2% while both the Dow Jones Industrial Average and the Russell 2000 were flat on the day.
| Index | Performance (+/-) | Value | |
|---|---|---|---|
| Nasdaq 100 | -0.18% | 12,984 | |
| S&P 500 Index | -0.07% | 4,128 | |
| Dow Industrials | -0.01% | 33,779 |
A recession now looks like a foregone conclusion, said Jeffrey Roach, chief economist at LPL Financial, citing the decline in the leading indicators index to the levels last seen in November 2020 when the economy was contending with the COVID-19 pandemic.
“Historically, an economic contraction has closely followed a decline in the LEI of this magnitude,” the economist said.
"The head fake from last year’s two quarters of negative economic growth and the uncertainty from an aggressive Federal Reserve were likely culprits for pushing down the markets last year."
The good news, however, is that Roach does not expect the markets to retest those lows despite the likelihood of a recession later this year.
Friday's Trading In Major US Equity ETFs:
In midday trading Friday, the SPDR S&P 500 ETF Trust SPY was 0.05% lower at $411.7, the SPDR Dow Jones Industrial Average ETF DIA weakened by 0.07% to $337.71 and the Invesco QQQ Trust QQQ was 0.1% higher to $316.61, according to Benzinga Pro data.
Among U.S. equity sectors, the Metals & Mining Select Sector SPDR Fund XME underperformed, plummeting 3%, followed by the Materials Select Sector SPDR Fund XLB, down 1.3%. The Consumer Discretionary Select Sector SPDR Fund XLY outperformed, up by 1%.
Latest Economic Data:
S&P Global’s flash manufacturing and service sector purchasing managers’ indices for the United States came in higher than expected in April. The manufacturing PMI rose from 49.2 in March to 50.4 in April, above the consensus estimate of 49. The services sector PMI also rose from 52.6 in March to 53.7 in April, beating forecasts of 51.5.
Fed Governor Lisa Cook is scheduled to speak at 4:35 p.m. EDT.
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Stocks In Focus:
- Procter & Gamble Company PG rose nearly 4% after the company reported better-than-expected results in Q1.
- AT&T, Inc. T rebounded 3.5% after dropping as much as 10.7% on Thursday and posting the second-worst session in forty years.
- CSX Corp. CSX shares rose over 3% after the railroad operator reported upbeat quarterly results.
- Tesla, Inc. TSLA attempted a mild rebound, up 1%, after Thursday’s 9.75% plunge. Cathie Wood’s Ark Invest set a $2,500 price target for the stock by 2027.
- Freeport-McMoRan, Inc. FCX tumbled 5% despite reporting better-than-expected results in Q1.
- Regions Financial Corp. RF slipped 3% after reporting its quarterly results.
- Schlumberger Limited SLB fell 5%. The oilfield services firm announced first-quarter adjusted profits per share and revenue that were above expectations, while cash flow from operations fell short of estimates.
- U.S. Bancorp USB lost 4.5% hitting new lows for the year, amid the dismal results the company reported on Wednesday.
Top Analysts’ Call
- AT&T, Inc. T: HSBC upgrades from Hold to Buy with a $21 price target.
- DoorDash, Inc. DASH: Roth MKM initiates at Neutral and $72 price target.
- UnitedHealth Group, Inc. UNH: Cantor Fitzgerald initiates at Overweight with a $591 price target.
- Humana, Inc. HUM: Cantor Fitzgerald initiates at Overweight with a $597 price target.
Commodities, Bonds, Forex And Other Global Equity Markets:
Crude oil rose 1%, with a barrel of WTI-grade crude trading at $77.78. The United States Oil Fund ETF USO was 1.2% higher to $68.39 per share.
Treasury yields rose, with the 10-year yield surging by 3 basis points to 3.56% and the two-year yield also up 3 basis points to 4.18%. The iShares 20+ Year Treasury Bond ETF TLT was 0.4% lower on the day.
The dollar was broadly flat, with the U.S. dollar index, which is tracked by the Invesco DB USD Index Bullish Fund ETF UUP, up 0.05%. The EUR/USD pair, which is tracked by the Invesco CurrecyShares Euro Currency Trust FXE, was flat at 1.0971.
European equity indices closed in the green and updated new highs. The iShares MSCI Eurozone ETF EZU rose 0.5%.
Gold dropped 1.4% to $1,976/oz. The SPDR Gold Trust GLD was 1.7% weaker to $183.71. Silver fell 1.2% to $24.94, with the iShares Silver Trust SLV trading 1% lower to $22.93 per share. Bitcoin fell 1% to $27,944.
Staff writer Piero Cingari updated this report midday Friday.
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