The S&P 500 (SPX) started Monday modestly lower, observes Jon Markman, editor of Strategic Advantage.
That was not a surprise. Bears should have defended key resistance at 4,470, the 200-day moving average.
Early in the session, however, it became clear bears were not really committed to a spirited defense. After slipping back to 4,430, the benchmark index went on to close at 4,461, essentially unchanged.
I understand there are a lot of reasons to be bearish. The war in Ukraine, rising interest rate, the pandemic and commodity prices should be a headwind for stocks. Unfortunately for bears, the market is beginning to climb the wall of worry.
In short, traders are starting to ignore bad news. This development means there is a potential for another wave of short covering this week amid a lighter version of last week's four consecutive strong positive sessions.
The next meaningful overhead resistance level for the S&P 500 is at 4,590, the February highs. Crucial support is 4,346.
The Upshot
The Nasdaq (NQ=F) fell 0.4% to 13,838.46 and the Dow (DIJ) declined 0.6% to 34,552.99. The energy and materials sectors were the biggest gainers, while communication services and consumer discretionary lagged.
Breadth favored decliners five-three, and there were 194 new lows vs 21 new highs. Big caps on the new high list included Berkshire Hathaway (BRK-B), UnitedHealth Group (UNH), AbbVie (ABBV), Eli Lilly (LLY), and Bristol-Myers Squibb (BMY). Drugs and insurance are your vanguard now as energy and tech have slipped into the background.
The US ten-year yield jumped 16 basis points to 2.31%, the highest since May 2019, while West Texas Intermediate crude oil futures gained $7.33 to $112.03 per barrel.
The Federal Open Market Committee is prepared to take any actions needed to bring down inflation from its elevated levels, even if that means accelerating or extending the pace of rate increases, Federal Reserve Chair Jerome Powell said Monday in a speech to the National Association for Business Economics 2022 Annual Policy Conference.
"We will take the necessary steps to ensure a return to price stability," Powell said. "In particular, if we conclude that it is appropriate to move more aggressively by raising the federal funds rate by more than 25 basis points at a meeting or meetings, we will do so. And if we determine that we need to tighten beyond common measures of neutral and into a more restrictive stance, we will do that as well."
Goldman Sachs economists late Monday said they now expect the Fed to raise interest rates by 50 basis points at both its May and June policy meetings, which would be a surprise. Economists led by Jan Hatzius said the Fed will likely raise by 25 basis points in the four remaining meetings in the second half of the year, with three quarterly hikes in the first nine months of 2023, according to a Bloomberg report.
EU leaders plan to discuss whether to discontinue Russian energy imports after committing to cutting the use of natural gas from the country by 66% this year, CNN reported. The ban would have an impact on the global crude market and hit Europe the hardest, according to a Bloomberg report citing Kremlin spokesman Dmitry Peskov.
The biggest gainers in the S&P 500 Monday were energy producers Occidental Petroleum (OXY) and Marathon Oil (MRO), each advancing around 8.5%.
Meanwhile, the US is in "ongoing discussions" with other countries to give Ukraine "the kinds of defense capabilities to include long-range air defenses that we know that they're comfortable using," CNN reported, citing Pentagon spokesperson John Kirby during a briefing at the Pentagon. The news comes hours after the Russian deadline for defenders of the eastern Ukrainian city of Mariupol to surrender passed, with Ukrainians rejecting the terms, CNN reported.
In company news, Nielsen (NLSN) rejected an unsolicited $9.1 billion buyout proposal from a group of private equity firms, saying the $25.40 per share offer significantly undervalues the media measurement and analytics company. Its shares slumped 6.9%.
A Boeing (BA) 737-800 jet operated by China Eastern Airlines crashed in southern China on Monday, prompting the airline to ground all 737-800 airplanes. Shares of Boeing dropped 4%.
