Introduction
The stock market saw notable activity last week, highlighted by significant gains in the Dow Jones Industrial Average and mixed results in the S&P 500 and Nasdaq Composite. This article provides an in-depth analysis of last week’s market performance and previews critical factors to watch for in the coming week.
Major Developments in the Stock Market
The Dow Jones Industrial Average
The Dow Jones Industrial Average jumped 574.84 points on Friday, marking its best session of the year. This surge was driven by impressive advances from Salesforce and UnitedHealth, which rose 7.5% and 2.8% respectively. Despite this strong finish, the Dow recorded a second consecutive week of losses, slipping 0.98%.
S&P 500 and Nasdaq Composite
The S&P 500 gained 0.80%, while the Nasdaq Composite edged lower by 0.01% due to declines in key technology stocks such as Nvidia. The S&P 500 and Nasdaq ended their five-week win streaks with respective slides of 0.51% and 1.1%.
Market Performance in May
Despite the weekly downturns, May was a winning month for the major indices. The Dow added 2.3%, the S&P 500 rose 4.8%, and the Nasdaq gained 6.88%, its best month since November. A significant contributor to this strength was Nvidia, which posted a 27% gain for the month after releasing stellar earnings.
Economic Data and Market Sentiment
The market's choppiness was influenced by several factors, including economic data that largely met expectations. The core personal consumption expenditures price index (Core PCE) increased by 0.2% in April, 2.8% over the year, just slightly over forecasts. With numbers coming in near expectations, it allowed the market to breathe a "sigh of relief," according to Chris Zaccarelli, Chief Investment Officer for Independent Advisor Alliance.
Corporate Earnings and Stock Buybacks
Corporate earnings played a crucial role in market movements. Dell Technologies saw a significant drop of over 17% despite strong earnings, due to a smaller-than-expected AI server backlog. Conversely, stocks like Zscaler and Gap experienced substantial gains. Additionally, May set an all-time record for stock buybacks, with companies announcing $201 billion in planned repurchases, reflecting strong corporate confidence.
Key Takeaways and Predictions for the Upcoming Week
Market Outlook
The market is expected to remain volatile, influenced by factors such as the upcoming election, Treasury yields, and consumer spending. Next week manufacturing PMI, ISM manufacturing, unemployment rate, and jobless claims will be crucial to track to track the short-term direction of the market until the election and inflationary pressures pass and a new market trend is established.
Economic Indicators to Watch
Several economic indicators indicate the Federal Reserve's rate decision will likely take longer. The Commerce Department's recent report on consumer spending showed a slowdown, prompting revisions to GDP growth forecasts by major institutions like Goldman Sachs and the Atlanta Federal Reserve. This put growth down 0.8% from the update a week ago on the Altanta Federal Reserve's GDPNow tracker website.
Corporate Earnings Reports
Key earnings reports to watch include those from major retailers and technology companies. Analysts' predictions, such as Morgan Stanley's outlook on Costco and Ulta Beauty, will provide insights into sector performance and investor sentiment. Additionally, Gary Millerchip, the Costco CFO has said, "As inflation has level off, our members are returning to purchasing more discrestionary items..." Millerchip, also stated the $1.50 Costco hotdog is here to stay!
Stock Buybacks and Market Sentiment
The record-breaking stock buybacks announced in May could influence market sentiment positively. Companies' confidence in future earnings, as evidenced by these buybacks, suggests potential resilience in the face of economic uncertainties. With it happening across the board in the market, it shows confidence in the markets future by large companies, potentially suggesting an end in sight for spiked prices. With Walmart and Target proclaiming to slash prices recently to entice shoppers back, America and the world may have settled into its new normal.
Election and Political Factors
Political developments, especially those related to the 2024 election, are expected to be significant market movers. Analysts like Christopher Harvey from Wells Fargo emphasized the potential impact of election dynamics on market stability and investor behavior. With politicians often leading the market, it is crucial to stay up to date with Washington's latest developments to try too stay ahead of the curve.
Sector-Specific Trends
Key sectors to watch include technology, retail, and healthcare, given their recent performance and upcoming earnings reports. The tech sector, in particular, will be closely monitored for its response to recent gains and subsequent pullbacks in major stocks like Nvidia and Tesla.
Trade Easier Analyst Insights
Key Support Levels to Watch: $113 and $114.05
The support levels at $113 and $114.05 are crucial markers. A support level is a price point at which a stock tends to find buying interest, potentially preventing it from falling further.
- $113: Historically, XOM has shown resilience around this level, making it a significant level for traders recently.
- $114.05: This slightly higher level often acts as a secondary support, providing an extra buffer zone before reaching the major support level at $113.
Important Analysis to remember
$XOM currently has a gap above the current price, with the gap reaching up near the $117.77 mark. Gaps fill 80% of the time acting as a magnet. Looking for potential rejection after the gap has filled.
Conclusion
Last week, we experienced a mix of highs and lows in the stock market, with significant movements in major indices and varied outcomes in corporate earnings. As we move into this shortened week, staying updated on the key factors to watch in the stock market, including economic indicators, corporate earnings reports, and political developments, will offer valuable context and opportunities. Whether you're tracking tech trends, awaiting Federal Reserve decisions, or analyzing new economic reports, staying informed is crucial for navigating the market landscape effectively.
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