This past week served as further proof that currently the bulls are still in charge of this market as we saw each of the three major averages make numerous new all-time highs, including the Dow Jones closing above 40K for the first time ever. This bullish surge in the market led to 10 of 11 S&P 500 sectors finishing the week in the green, led by Technology. As of Friday’s close, 79% of S&P 500 stocks were trading above their 200-Day moving average which is an additional indicator of broad bullish participation in the market’s rally. In addition to this, 64% of S&P 500 stocks closed the week trading above their 50-Day moving average. Generally, as the percentage of stocks above their 50-Day nears 70% or above, this is one indicator that the market broadly is becoming overbought in the short term. Also, when the 14-Day RSI of the S&P 500 index reaches 70 or higher, this is another overbought indicator; it currently stands at 67.97. Given that the S&P 500 has rallied strongly off the mid-April low and has strung together four consecutive positive weeks, the odds are increasing that we could see a minor retracement allowing the market to catch its breath. However, due to the recent new all-time highs it is clear that this bull market is very much still running.

Fresh off of last week’s enthusiastic bullish trading, awaiting the markets this week is likely the most crucial earnings report of Q1 earnings season. On Wednesday, NVIDIA Corp. will report their earnings and this event will have a significant effect on market sentiment as NVDA has been the poster company of the A.I. bull market. NVDA’s earnings report will likely be the most important determining factor for the market’s outcome this week. In addition to NVDA’s earnings report there are a few other companies reporting earnings that our team will be closely watching including one major cybersecurity company and a handful of household name retailers. On the macroeconomic front, there are two main reports that we are paying attention to this week. The first is the U.S. New Home Sales report as this is a key report for housing related stocks. Secondly, the other major report that we are tuned in for this week is the updated Initial Jobless claims. Recently Initial Jobless claims have been showing signs of possibly trending up. We will be watching to see if this week’s number serves to either confirm or deny a new trend forming.

  • U.S. New Home Sales– Every month, the U.S. Census Bureau releases their New Home Sales report which measures how many new construction homes were sold in that month. This report is a crucial measure for the major U.S. Homebuilders and businesses that are adjacent to this industry.
    • April’s New Home Sales report due on Thursday is expected to show that 680K new homes were sold during the month. This would be a slight decrease from March’s number and just about in line with the April number from one year ago.
  • Initial Jobless Claims – The Department of Labor provides a weekly report that records new Initial Jobless Claims in the U.S. While initial claims have remained below the high made in June of last year, since January of this year they have been slowly trending upward.  As long as initial claims remain consistently below 240K, this serves as a sign of continued health in the labor market.
    • Thursday’s report is expected to show 220K new initial claims, which is marginally lower than the previous week’s number of 222K. However, two weeks ago there was a larger spike in initial claims so investors will be watching to see if this becomes a trend.

Federal Reserve Watch

Last week delivered much of the same when it came to the Fed messaging. FOMC members continued to tout that they are not satisfied with where inflation currently stands, and they remain firm in their stance of holding rates higher until they see further progress. Additionally, at the last meeting, Chair Powell reaffirmed his stance that current monetary policy levels are sufficiently restrictive to deal with stubborn inflation and that he does not feel further hikes in this cycle are necessary. FOMC members continue to seemingly confirm that there will be no more rate hikes in this cycle and that the next ‘move’ will be a cut. However, this policy rate cut will not occur until the Fed has seen sufficient evidence confirming that inflation is continuing to fall toward their target goal. Up to this point, we have yet to see the evidence they are looking for. On Wednesday we will get the release of the ‘Minutes’ from the Fed’s most recent meeting in May. Investors will be looking forward to diving into this for any potential clues about the FOMC’s current thought process.

  • Following the latest Fed meeting and recent developments in macroeconomic data, Fed Futures markets reacted to the news and adjusted accordingly. The next FOMC meeting is scheduled for June 12th, however, markets are still indicating that the committee will hold rates at this meeting. With the recent weakness in some macroeconomic reports and positive inflation news this has boosted investors’ confidence that the first rate cut will occur at the September meeting.  The CME’s FedWatch tool now suggests that investors are assigning a 64.8% probability that the first rate cut will occur in September, which is up slightly from one week ago.  Additionally, Fed Funds Futures markets still signal that investors believe two rate cuts this year are back on the table. Currently, Fed Funds Futures show that investors feel that we will end the year with the Fed’s policy rate in the range of 4.75%-5.00% which would be 50 basis points lower than where we presently sit. At market close on Friday, Fed Futures odds for the November & December meetings each month show that markets are pricing in the likelihood of a rate cut at 82.0% & 89.2% respectively.

This Week’s Notable Earnings

Coming into this week, many Q1 earning reports are in the books with just about 95%ofS&P 500 companies having already reported. It has shaped into a strong earnings quarter with 78% of them reporting an upside EPS beat. Now, even with most of these reports behind us, this week we will get perhaps the most important earnings report of Q1. Investors are anxiously awaiting NVIDIA Corp.’s report that will be released this week. In addition to this major report, one of the top cybersecurity companies, Palo Alto Networks, Inc. will report their Q1 numbers this week. Finally, this week we will get the Q1 earnings numbers from a group of discount retailers including Target Corp., The TJX Companies, Inc., & Ross Stores, Inc.

  • Once the market closes on Wednesday, A.I. semiconductor giant, NVIDIA Corp. will report their Q1 earnings. According to analysts’ expectations, NVDA is projected to grow their ’24 Q1 earnings YoY by 411.9% and 8.14% Q/Q. NVDA’s report will draw a lot of eyes as this company’s results are surely to play a major role in market sentiment moving forward since they have been the figurehead of the “A.I.” themed rally this year.
    • NVDA earnings are expected to come in at $5.58 EPS.
  • On Monday after the closing bell, one of the top cybersecurity players, Palo Alto Networks, Inc., is set to report their first quarter results. PANW has frequently beaten earnings expectations over the past few years. After their last quarter, despite the earnings beat, the stock sank on lighter than expected guidance. Should PANW deliver on the 13.6% YoY quarterly EPS growth that analysts expect and deliver strong guidance, expect this stock to get a boost.
    • PANW earnings are expected to come in at $1.25 EPS.                                      
  • To round out this week’s notable earnings, there is a group of three well-known discount retailers on deck to report their Q1 results. Prior to the opening bell on Wednesday, both the TJX Companies, Inc. & Target Corp. are scheduled to post their Q1 earnings. Additionally, on Thursday after the market closes, Ross Stores, Inc. will report their Q1 numbers. Both TJX & ROST are each expected to post solid YoY quarterly EPS growth, while TGT is expected to report numbers that are in line with their ’23 Q1 results. 
    • TJX earnings are expected to come in at $0.87 EPS.
    • TGT earnings are expected to come in at $2.05 EPS.
    • ROST earnings are expected to come in at $1.35 EPS.

Thank you for reading this week’s edition of the Weekly Market Periscope Newsletter, I hope you enjoyed it. Please lookout out for the next edition of the newsletter as we will give you a preview of the upcoming week’s important market events.


Blane Markham

Author, Weekly Market Periscope

Hughes Optioneering Team

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