US Stocks Could Flatline As Rate-Hike Doubts Linger: Analyst Sees Market Strength In April Back-Half

Trading in the index futures suggests a cautious opening on Thursday as traders put inflation fears on the back burner and look ahead to the first-quarter earnings season. Some high-profile big banks will kickstart reporting on Friday, providing more clarity on the banking crisis.

Cues From Wednesday’s Trading:

The major indices closed Wednesday’s session lower, as traders weighed in on the March consumer price inflation report and the takeaways from the minutes of the March Federal Open Market Committee meeting.

Stocks gap opened higher after data showed that monthly inflation rates slowed more than expected and the annual rates came in line with expectations. The early optimism waned and the averages reversed course in late-morning trading and dipped below the unchanged line. Buying re-emerged shortly after and the averages recouped their losses and moved back up. The FOMC minutes served as a dampener, dragging the indices sharply lower in the afternoon.

The tech-heavy, Nasdaq Composite Index, which has been the underperformer in recent sessions, pulled back toward nearly a two-week low.

Consumer discretionary, IT services, IT and communication services stocks were among the biggest decliners of the session.

Analyst Color:

The bond market is saying that the Fed is done raising rates, said FS Insight Head Of Research Tom Lee. He noted that the two-year Treasury yield is trading about 83 basis points lower than the mid-point of the current fed funds rate.

If the Fed is done with raising rates sooner, it could mean the central bank will tolerate further easing of financial conditions, Lee said. He thinks this is particularly likely if the markets worry about credit tightening as commercial real estate and commercial mortgage-backed securities and other commercial lending markets show stress.

“We believe bears remain trapped and April is going to be a generally strong month (based upon “rule of 1st 5 days”),” the analyst said. He also raised the specter of April panning out to be a back-end-loaded month like March.

“We would use any weakness from a post-March CPI sell-off to add to equity exposure,” Lee said.

Futures Today

In premarket trading on Thursday, the SPDR S&P 500 ETF TrustSPY rose 0.09% to $408.41 and the Invesco QQQ TrustQQQ moved up 0.19% to $313.64, according to Benzinga Pro data.

Upcoming Economic Data:

OPEC’s monthly oil market report is due at 7 a.m. EDT.

The Bureau of Labor Statistics is scheduled to release the producer price inflation report for March at 8:30 a.m. EDT. Economists, on average, expect a 0.1% month-over-month increase and a 3% year-over-year rise in the headline index. In February, producer prices fell 0.1% month-over-month but rose 4.6% year-over-year. The monthly core PPI rate is expected at 0.3% compared to unchanged prices in February. The annual core rate may have decelerated from 4.6% to 3%.

The Labor Department is scheduled to release the weekly jobless claims report at 8:30 a.m. EDT. The number of individuals claiming unemployment benefits may have increased from 228,000 in the week ended April 1 to 232,000 in the week ended April 8.

The Treasury will auction 4-week and 8-week bills at 11:30 a.m. EDT and 30-year bonds at 1 p.m. EDT.

See also: Best Options Trading Strategies

Stocks In Focus:

• Harley-Davidson, Inc. HOG fell over 4% in premarket trading after it announced the departure of its CFO Gina Goetter just after the company reports its financial results later this month. Goetter is assuming a similar role at toymaker Hasbro, Inc. HAS.
• Alibaba Group Holding Limited BABA rose over 1.70% after Softbank Group Corp. SFTBY hinted at exiting the e-commerce giant.
• Delta Airlines, Inc. DAL and Fastenal Company FAST are among the key companies due to release their quarterly results before the market open.

Top Analysts’ Call

• Merck & Co, Inc. MRK: Citigroup upgrades from Neutral to Buy and raises price target from $105 to $130
• Costco Wholesale Corp. COST: William Blair initiates at Outperform
• General Motors Co. GM: Mizuho initiates with a Neutral rating and a $39 price target
• Broadcom, Inc. AVGO: Benchmark initiates with a Buy rating and $770 price target

Commodities, Bonds, Other Global Equity Markets:

Crude oil futures were seen snapping two sessions of strong gains. In early European trading, oil slipped 0.16% to $83.11 a barrel.

The yield on the benchmark 10-year U.S. Treasury note was trading almost flat at 3.422%.

The Asian markets ended Thursday’s session on a mixed note, tracking the lackluster sentiment from Wall Street overnight. The Chinese market pulled back despite the release of strong trade data for April

European stocks were mixed in late-morning trading on Thursday. While France’s CAC-40 was up about a percent, Germany’s DAX and U.K.’s FTSE Index were down modestly

Read Next: Peter Schiff Says Real Reason Gold Prices Are Rising Is Because 'High Inflation Is Here To Stay'

Image generated using AI via Midjourney