Investors might get a reprieve within the week forward from the vicious promoting cycle that has gripped the inventory market since late March.
Stocks bounced off of Thursday's washout lows and had been set to exit the week with decreased losses after Friday's rally. Buyers on Friday hunted for bargains amongst small caps, biotechnology names, the Arkk Innovation ETF and different development names that had been hardest hit.
The S&P 500 jumped again above the important thing 4,000 stage Friday, after touching 3,858 on Thursday — close to the three,800 to three,850 space that chart analysts have been concentrating on for a backside. But whereas it looks like the market might bounce quickly, market technicians say that zone will seemingly be examined once more afterward.
"Does that mean the lows of the year are in? Probably not, but it could create an oversold bounce back to retest the 4,100 or 4,200 level in the S&P 500," mentioned T3Live.com's Scott Redler, who follows the market's short-term technicals. "In bull markets, you get weeks when you pull in. In bear markets, you get oversold bounces.
Redler said he expects traders to try to sell the rally. On Friday, the Nasdaq surged 3.8% though it was down 2.8% for the week, and the Dow was up 1.5% but down 2.1% for the week. The S&P 500 ended Friday at 4,023, up 2.4%, but down the same amount for the week.
"It has the components for an oversold bounce which may final greater than per week. I believe this bounce goes to be led by all of the oversold names which are down 70% to 80% from their highs," he said. "It does not imply you may blindly purchase. Not the whole lot goes to be created equally on this bounce."
Redler said the fact that the Federal Reserve does not meet for a few weeks could add some support to stocks. Markets have been nervous that the Fed will raise interest rates too quickly and choke the economic recovery as it tries to snuff out hot inflation.
In the week ahead, investors will continue to look for clues on the course of the central bank's interest rate hiking path in both economic reports and comments from Fed officials.
Fed Chairman Jerome Powell is slated to speak at a Wall Street Journal conference Tuesday afternoon. For now, the market expects a half-point interest rate hike at the June meeting and another in July, with possibly a third in September. The central bank raised its fed funds target rate by a half point this month, after a quarter point hike in March.
The health of the consumer will be a major focus in the coming week. The economic calendar includes April retail sales and also a look at the housing sector, with the National Association of Home Builders' survey; both reports are set for release Tuesday, with housing starts coming on Wednesday and existing home sales Thursday.
Walmart, Home Depot and Target are set to report earnings next week, and of these big chain stores could provide good insight into the impact of inflation on consumer spending and attitudes.
Nearly a bear market
Perhaps the most telling thing for investors in the coming week will be just how the stock market trades after its effort to bounce back Friday.
The S&P 500's dip to 3,858.87 on Thursday took the index to a decline of 19.55% from its high on an intraday basis — very close to the official 20% decline for a bear market.
The unrelenting run up in bond yields also slowed, after the 10-year yield peaked this past week at 3.2%. The 10-year was at 2.93% Friday.
"I believe what's most encouraging to me is the speed rout has stopped. All 12 months lengthy, short-term yields have been pushing up the 10-year yields," said Jim Paulsen, chief investment strategist at Leuthold Group. He noted that inflation expectations in the bond market have also backed down, and the reduced pressure from the rates market could help stocks rally. Yields move opposite prices in the bond market.
Fairlead Strategies founder Katie Stockton said the slowdown in the 10-year yield's climb is important. For the broader economy, the 10-year's run from about 1.5% at the start of the year has already had a impact on housing, since home mortgages are influenced by it.
For stocks, technology and growth names have been most impacted by higher Treasury yields. That's because higher rates make money more expensive, and cheap money is the fuel for stocks with high valuations.
"I believe 10-year yields are simply going to be stalled in right here," said Stockton, noting her view is purely based on chart analysis. "Such a steep uptrend is unsustainable. ... We imagine there's going to be consolidation in Treasury yields and within the greenback." She said the support for the 10-year is at 2.55% and upward resistance is at 3.25%.
Paulsen noted that much speculation has been wrung from high-fliers and big cap tech. "Look on the FANG shares going from 14% of market cap to 9%. A whole lot of the tech bleed is completed," he said.
Investors were also watching Apple this past week, after it broke support at $150. The stock has an outsized influence on the market, since it is the biggest U.S. company by market cap and is part of the Dow, the S&P 500 and Nasdaq.
Apple stock fell just below Stockton's target of $139 on Thursday but recovered Friday, to close at $147.11 per share.
Stockton said her chart analysis is signaling the market could see around two weeks of stabilization, either with a bounce or sideways move. "It's not a purchase sign. I'm not recommending individuals purchase."
There could be an oversold bounce, "and we typically plan to make use of that oversold bounce to cut back publicity," she said.
Her downside S&P 500 target had been 3,815, and she said it is still in play. "We need to assume it will likely be a retest," Stockton said. "The retest has a better probability of yielding a breakdown as a result of the momentum remains to be to the draw back."
Week forward calendar
Earnings: Warby Parker, Take-Two Interactive, Tencent Music, Ryanair, Weber
8:30 a.m. Empire State manufacturing
8:55 a.m. New York Fed President John Williams
4:00 p.m. TIC knowledge
Earnings: Walmart, Home Depot, Vodafone, JD.com
8:00 a.m. St. Louis Fed President James Bullard
8:30 a.m. Retail gross sales
8:30 a.m. Business inventories
9:15 a.m. Philadelphia Fed President Patrick Harker
9:15 a.m. Industrial manufacturing
10:00 a.m. Business inventories
10:00 a.m. NAHB survey
2:00 p.m. Fed Chairman Jerome Powell at a convention sponsored by The Wall Street Journal
2:30 p.m. Cleveland Fed President Loretta Mester
6:45 p.m. Chicago Fed President Charles Evans
Earnings: Target, Cisco Systems, Lowe's, TJX, Burberry, Tencent Holdings, Analog Devices, Shoe Carnival, Bath and Body Works, Synopsys
8:30 a.m. Housing begins
8:30 a.m. Building permits
4:00 p.m. Philadelphia Fed's Harker
Earnings: BJ's Wholesale, Applied Materials, Deckers Outdoor, Ross Stores, Palo Alto Networks, VF Corp, Eagle Materials, Kohl's, Grab Holdings, Vipshop
8:30 a.m. Initial claims
8:30 a.m. Philadelphia Fed manufacturing
10:00 a.m. Existing house gross sales
10:00 a.m. Leading index
4:00 p.m. Philadelphia Fed's Harker
Earnings: Deere, Foot Locker, Booz Allen Hamilton