Where Things Stand in the Market as of Sunday, June 23rd, 2024

Good Morning,Traders & Investors!

It’s anyone’s guess as to exactly what spooked the market at the end of last week, but as we’ve been saying, the market has become increasingly overbought, and when that happens, a trickle of sellers can quickly become a torrent. But leading stocks have shown surprising resiliency the last several weeks, resiliency rooted in the optimism that with inflation slowly drifting downward, an interest rate cut can’t be too far away. And indeed, markets currently see roughly 65% odds of a Fed rate cut in September and an estimated two cuts for the year. While the Nasdaq and S&P 500 were chilling their heels the end of last week, the Dow managed to move back above both its 21-day and 50-day moving averages, leaving the Russell 2000 as the sole loser in the group. The Russell 2000, though, is important in that it contains the smaller stocks that retail traders invest in, and as such, is a barometer of how individual investors are doing.

Next week will see a number of potentially market-moving economic reports, but the most consequential among them is the Fed’s favorite in determining interest rate policy: The Commerce Department’s PCE price index, which will be released Friday morning. Economists are expecting a relatively tame May reading. In addition to next week’s economic reports, Micron’s (MU) earnings are due late Wednesday and could be a key catalyst for the market as well as for the strength of the company’s AI credentials. Finally, it’s not too early to begin thinking about the start of earnings season, which is now only about 3 weeks away. Some analysts use the runup to earnings season to upgrade or downgrade certain stocks, so be aware of this.