Stocks are set to open the holiday-shortened week on a slightly negative note as traders take a pause following the recent impressive rally. Concerns linger as China’s central bank cuts key lending rates after witnessing growth post-reopening. Domestically, market participants will closely monitor comments from central bank officials to gauge the future direction of interest rates.
Last Week’s Trading:
Supported by mild inflation data, the Federal Reserve’s pause, and positive tech earnings, the market experienced solid gains in the week ending June 16.
Once again, technology stocks took the lead, maintaining their strong performance throughout the year. The Nasdaq Composite Index achieved an eight-week winning streak, its best run since 2019. Both the tech-heavy index and the broader S&P 500 Index finished the week slightly below their 14-month highs.
With a five-week winning streak, the S&P 500 Index continues its upward trajectory, while the Dow Industrial posted gains for the third consecutive week.
U.S. Indices’ Performance on Friday
| Index | Performance (+/-) | Value |
| Nasdaq 100 | +0.13% | 15,212.65 |
| S&P 500 Index | +0.18% | 4,434.11 |
| Dow Industrials | +0.12% | 34,451.18 |
| Russell 2000 | -0.77% | 1,874.54 |
Analyst Color:
A decline in volatility bodes well for the market, said LPL chief technical strategist Adam Turnquist.
“Evidence of a regime shift from high to low implied volatility is building,” the analyst said referring to the CBOE Volatility Index, or VIX, which recently fell to a multi-year low of 14.5 as of June 15.
This has placed the index in the fourth quintile group after spending most of last year at above-average levels.
Turnquist noted that historically, periods of high volatility are followed by periods of low volatility, especially during the transition from a bear to a bull market. “While high implied volatility has historically produced the highest average S&P 500 returns, the standard deviation around these returns is also relatively high,” he said.
“Periods of low volatility have historically generated above-average returns with less dispersion.”
Futures Today
| Futures | Performance (+/-) |
| Nasdaq 100 | -0.44% |
| S&P 500 | -0.39% |
| Dow | -0.39% |
| R2K | -0.63% |
Futures Performance On Tuesday
QQQ) gained 0.49% to $365.61, according to Benzinga Pro data.
Upcoming Economic Data:
The holiday-shortened week’s economic calendar is dominated by housing market readings. The National Association of Home Builders reported Monday that its housing market index, reflecting sentiment among homebuilders, rose to 55 in June from 50 in the previous month, marking the highest reading since July 2022.
A slew of Fed speeches and Fed Chair Jerome Powell’s Congressional testimony are among the other key economic catalysts for the week. Preliminary business activity data for June is also due later in the week.
St. Louis Fed President James Bullard, a Federal Open Market Committee member, is scheduled to speak at 6 a.m. EDT.
The Commerce Department is due to release its housing start and building permits data for May at 8:30 a.m. EDT. Economists, on average, expect housing starts for the month to come in at 1.40 million units, nearly flat with April’s 1.401 million units. Building permits, an indicator of future housing activity, rose from 1.147 million units to 1.425 million units.
The Treasury is set to auction three- and six-month bills at 11:30 a.m. EDT.
New York Fed President John Williams, also a FOMC member, will speak at 11:45 a.m. EDT.
See also: How To Trade Futures
Stocks In Focus:
- Alibaba Group Holding Limited (NYSE:BABA) fell over 3% in premarket trading after the company announced that co-founder Joe Tsai will take over as chairman and Daniel Zhang will move over to assume the responsibility of the cloud computing business. He is also being replaced as CEO by Eddie Wu, chairman of Taobao and Tmall online commerce divisions.
- FedEx Corp. (NYSE:LZB) are the key names that report earnings after the market close.
Commodities, Bonds, Other Global Equity Markets:
Crude oil futures eased 0.07% to $71.86 in early European trading on Tuesday. The commodity rose 2.3% in the week ended June 16.
The yield on the benchmark 10-year Treasury note edged up 0.022 percentage point to 3.791%.
Major Asian markets had a mixed outing on Tuesday, with Hong Kong’s Hang Seng Index pulling back sharply. The Chinese market ended mixed after the People’s Bank of China cut its one-year loan primary rate by 0.1% points to 3.55% in a bid to kickstart growth following the reopening.
The muted reaction by traders was due to fears that the reduction may be inadequate to create a meaningful impact.
The Australian market gained ground after the minutes of the May monetary policy meeting showed that the decision to raise the rate was finely balanced. This was perceived as a dovish signal by the market.
European stocks traded lower in late-morning trading on Tuesday.
