Both bulls and bears struggled Monday to gain control over the stock market, suggests Jon Markman, editor of Strategic Advantage.

The benchmark S&P 500 (SPX) finished unchanged at 4,391. The sloppy action means the benchmark remains below its key 200-day moving average at 4,495.

A near-term positive development is semiconductor stocks seem to be making a short-term bottom. Chip stocks have come under severe pressure in 2022 as traders worry the rise in interest rates will choke off economic growth, limiting demand.

It would be a bitter pill for an industry that has been supply constrained since 2020 when the pandemic began. Shares of the VanEck Vectors Semiconductor (SMH) exchange traded fund found a strong bid early Monday and managed to gain 1.7% by the closing bell.

Further strength for chip stocks this week would go a long way toward lifting the S&P 500 to its 200-day moving average.

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Bulls will need to retake the 4,500 level soon to have any hope of a bigger rally in the second quarter. There is no reason to get aggressive with long positions ahead of that conquest.

Critical support for the benchmark remains at 4,350 and 4,315.

The Upshot

The Dow (DJI) declined 0.11% to 24,411.69 while the Nasdaq (NDX) declined 0.14% to 13,332.36. Healthcare (XLV) was the steepest decliner, while Energy (XLE) was the biggest gainer.

Breadth favored decliners 2-1, and there were 858 new lows vs. 292 new highs. Big caps on the new high list included Shell (SHEL), Raytheon (RTX), Deere (DE), Canadian Natural Resources (CNQ), and Nutrien (NTR). That’s an odd vanguard of missiles, fertilizer, tractors. and drillers.

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The US 10-year yield (TNX) jumped 5.6 basis points to more than 2.86%, the highest since December 2018. Wow.

The National Association of Home Builders' monthly housing market index fell to 77 in April, declining for the fourth month in a row, from 79 in March, in line with the forecast in a survey compiled by Bloomberg.

"The housing market faces an inflection point as an unexpectedly quick rise in interest rates, rising home prices, and escalating material costs have significantly decreased housing affordability conditions," Robert Dietz, chief economist at NAHB, said.

Goldman Sachs (GS) became the latest on Wall Street to ramp up expectations for a technical recession, suggesting a 35% probability within the next two years. Stifel chief economist Lindsey Piegza said in a note on Monday: "As the Federal Reserve gears up for an even more aggressive policy pathway, likely resulting in a 50 basis point hike in May and an inaugural drawdown of the balance sheet, the Federal Open Market Committee will struggle to navigate a soft landing." That’s a nice way of saying he expects the Fed to fail, making mistakes that will lead to a recession.

The West Texas Intermediate crude oil futures (CL=F) climbed $1.96 to $108.91 per barrel.

Russia bombarded cities across Ukraine on Monday, with at least four missile strikes reported in the western city of Lviv, CNN reported. President Volodymyr Zelensky reportedly said Ukraine was unwilling to give up territory in the eastern part of the country to end the war with Russia.

China's economy expanded 4.8% in the first quarter, above the market expectations for a 4.2% increase. However, endless lockdowns in certain less developed parts of the country have hit domestic consumption, and the jobless rate in cities has jumped, Commerzbank said in a note.

Meanwhile, Twitter's (TWTR) move to limit Tesla (TSLA) chief executive Elon Musk's ability to accumulate more than a 14.9% equity stake in the social media giant gives its board time to find another buyer, a note from Wedbush said. Shares of Twitter rose 4.7%, the most in the S&P 500.

The worst performer on the index was Charles Schwab (SCHW), down 8.2%, after its first-quarter results unexpectedly fell from the year before. The brokerage said it navigated "a complex set of crosscurrents," with market volatility impacting securities lending and asset valuations.

Learn more about Jon Markman here...