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What to know for next week

Gain exclusive insights into the market and a complete market performance analysis. Review the Federal Reserve’s standpoint on interest rates, inflation developments, and housing market impacts. with a play of the week!

By Alpaca

This week we delve into the recent performance and trends of the Nasdaq and provide a comprehensive market performance overview. As we navigate through the complexities of the financial markets, we examine the Federal Reserve’s impact on interest rates, the evolving inflation and economic growth landscape, and the ongoing effects on the housing market. Additionally, we'll highlight sector performances within the S&P 500, stock winners and losers, and provide insightful trade ideas.

The Nasdaq Composite: Recent Performance and Trends

The Nasdaq Composite ticked higher on Friday to close at a record for the fifth straight session. The tech-heavy index inched higher by 0.12% to end at 17,688.88. This milestone reflects ongoing investor confidence in tech stocks.

Market Performance Overview

S&P 500 and Dow Jones Industrial Average

While the Nasdaq Composite hit new highs, the S&P 500 inched lower by 0.04%, closing at 5,431.60, snapping a four-day win streak. The Dow Jones Industrial Average slipped 57.94 points, or 0.15%, to end at 38,589.16. These mixed results highlight the complex nature of today's financial markets.

Federal Reserve’s Impact on Interest Rates

Interest Rate Status

Chairman Jerome Powell emphasized no plans for increasing rates in the near future, reflecting a conservative stance amidst economic uncertainties. Talks of rate cuts have been reduced significantly, from three potential cuts estimated earlier this year to just one by the end of 2024.

Influencing Factors

  • Economic Growth: Solid pace of expansion in economic activity.
  • Labor Market: Persistently low unemployment rates.
  • Inflation Trends: Steadily easing but remains elevated.

Inflation and Economic Growth

Inflation remains a critical concern for the Fed. Officials revised their forecast, predicting a higher year-end inflation rate than previously estimated. The key points from the meeting include:

  • PCE Inflation: Expected to end the year at 2.6%.
  • Core PCE Index: Projected to reach 2.8% by the end of 2024.

This shows a moderate upward revision from the March projections, prompting the Fed to remain vigilant about inflationary pressures.

The Housing Market and Fed Policies

Higher interest rates continue to impact the housing market. As discussed in today’s meeting, Chairman Powell noted the significant effect on home-buying activities and the prolonged timeline for rent normalization:

  • Impact on Home-Buying: Reduced activity due to higher mortgage rates.
  • Long-Term Estimates: Return to normalcy could take years given the current economic distortions.

Sector Performance in the S&P 500

Eight of the 11 sectors in the S&P 500 slid during the session, with communication services, information technology, and consumer staples emerging as the only winners. More than 360 stocks within the broad market index ended the day with declines. Key insights from the market include:

  • Communication Services: Strong performance driven by consumer demand.
  • Technology: Continues to benefit from ongoing innovation and investment.
  • Consumer Staples: Robust due to consistent consumer demand, even in volatile markets.

Corporate Highlights: Winners and Losers

  • Winners:
    • Adobe saw a significant leap of 14.5% on Friday after its fiscal second-quarter results surpassed Wall Street estimates.
    • Broadcom rallied significantly, leading the S&P 500 with a more than 23% increase, the biggest weekly gain in its history.
  • Losers:
    • Caterpillar and Boeing experienced declines, weighing down the Dow Jones Industrial Average.
    • Carnival and Norwegian Cruise Line were the biggest laggards in the S&P 500.
    • Invesco Equal Weight S&P ETF (RSP) faces investor scrutiny, flirting with important support levels after peaking in late March.
  • Oil Prices: U.S. crude oil broke a three-week losing streak, reflecting tighter market conditions heading into Q3.

Trade Easier Insights

Play of the Week: $TSLA

Recent Performance Overview

Analyzing the recent performance of $TSLA, the stock hovers around the $177.60-$178.00 range. This price point is crucial for investors considering long positions.

  • Current Close: $177.60 - $178.00
  • Potential Dip: $174.75 - $175.00
  • Upside Target: $180 - $185
  • Potential Short: ~$180+, if it looks weak, look for short down to $170

Optimal Entry Points for $TSLA

Identifying optimal entry points is fundamental for maximizing returns and minimizing risks. For $TSLA, the following ranges are noteworthy:

  • Initial Entry Point: As $TSLA's current close is around $177.60-$178.00, this range presents a viable entry point for starting a position.
  • Potential Lower Range: If $TSLA drops to the $174.75-$175.00 area, it could offer an even better entry point for a long position.
  • Upside Potential: Depending on market strength, targeting the $180-$185 area may yield significant gains.
  • Short Potential: If the $180 range does not look strong, shorting may be an option down to the $170 area.

Strategy in Action

Consider a staggered approach to investing in $TSLA:

  • Starter Position: Initiate a position at the $177.60-$178.00 range or wait for a lower price if looking weak.
  • Additional Buys: If the stock dips to $174.75-$175.00, consider adding or buying into your position depending on strength.
  • Profit Targets: Aim to take profits around the $180-$185 range, adjusting based on market strength and performance.
  • Ride it up, ride it down: Short the stock once weakness appears in the $180-$185 range and ride it to around the $170 area.

Before making any investment decisions, conducting thorough research and considering consulting with a financial advisor is crucial. This analysis is based on previous price action, which does not indicate future price action.

Upcoming Economic Events

  • Retail Sales: Expected 0.3%
  • Juneteenth Holiday: June 19, 2024
  • Initial Jobless Claims: Expected: 242K
  • Philadelphia Fed Manufacturing Index (Jun): Expected: 4.8
  • Crude Oil Inventories: Previous 3.730M
  • S&P Global US Manufacturing PMI (Jun): 51.0 (Expected: 51.3)
  • S&P Global Services PMI (Jun): 53.4 (Expected: 54.8)
  • Existing Home Sales (May): 4.08M (Expected: 4.14M)

Major Earnings:

  • Monday (June 17): Lennar Corp. (LEN), La-Z-Boy Inc. (LZB)
  • Tuesday (June 18): America’s CAR-MART Inc. (CRMT), KB Home (KBH)
  • Thursday (June 20): Accenture (ACN), Kroger Co. (KR), Commercial Metals Co. (CMC), GMS Inc. (GMS), Winnebago Industries Inc. (WGO), Smith & Wesson Brands Inc. (SWBI)
  • Friday (June 21): Carmax Inc. (KMX)

Conclusion

As we conclude this week's analysis, it's evident that the Nasdaq's recent performance underscores a strong investor confidence in tech stocks, while the broader market presents a mixed picture. The Federal Reserve's cautious approach to interest rates amidst economic uncertainties continues to influence market dynamics.

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