Bulls are feeling more chipper now that there’s a growing sense that the Fed may be closing in on the end of its rate-hiking and business-squashing campaign, says Jon Markman, editor of Strategic Advantage.
Seems unlikely but that’s the new fringe narrative.
Bears had a disquieting session on Thursday, and their situation may worsen before it gets better.
The S&P 500 (SPX) started the session modestly higher as traders pressed toward overhead resistance at 3,865. Bears pushed back on multiple occasions intraday, sending the benchmark well off the session highs.
In the end, though, resistance fell and frantic short-covering catapulted the S&P 500 to 3,903, a closing gain of 1.5%.
Bears are now exposed and vulnerable. The next resistance point is the declining 50-day moving average at 3,980.
I wrote Wednesday that a rally beyond 3,865 might leave bears unprotected from a big gain. Now they are staring further trouble in the face. It is important to keep in mind that the bigger trend is bearish.
The macroeconomic picture is murky, as short-term interest rates rise and corporate profit margins flatten. This combination should be negative for stock prices. The problem on Thursday for bears was traders thumbed their noses at the bad news.
An analytics report from Challenger Gray before the open showed that job cuts in June surged 57% month-over-month. Oww. In the near term, there is a critical support for the S&P at 3,742.
SA TradeView: The ProShares UltraShort S&P 500 (SDS) closed at $47.36 Thursday, down 2.9%. The June Nonfarm Payroll report is due tomorrow before the open. We may need to exit our short position. I will advise intraday if necessary.…Current: Long ProShares UltraShort S&P 500 (SDS) from $48.70. Target is $57.10; stop is $46.40 (after 11:00 am ET).
The Backstory: The Dow (DJI) advanced 1.1% to 31,384.55 and the Nasdaq (IXIC) was 2.3% higher at 11,621.35.
Energy, consumer discretionary, and technology were the top performers, with utilities the only sector in the red.
Breadth favored advancers seven-two and there were 34 new highs vs 98 new lows. The leaders were Cigna Corporation (CI), Vertex Pharmaceuticals (VRTX), Progressive (PGR), Halozyme Therapeutics (HALO), and FTI Consulting (FCN). That’s decent leadership.
The US ten-year yield jumped 8.9 basis points to 3%. West Texas Intermediate futures surged 3.8% to $102.24.
The seasonally adjusted number of initial unemployment claims advanced by 4,000 to 235,000, the highest level since January 15, during the week ended July second, the Department of Labor said Thursday. The consensus on Econoday was for 230,000. The previous week's level was unrevised at 231,000.
US nonfarm payrolls likely rose by 268,000 in June after an increase of 390,000 jobs in May, while the unemployment rate is expected to hold steady just above the pre-pandemic level, a survey compiled by Bloomberg shows. The June employment data are scheduled to be released at 8:30 am ET Friday.
A US interest rate increase of 75 basis points in July is "not a done deal" as slowing economic growth could push the Federal Reserve toward a "smaller hike," Pantheon Macroeconomics said in a research note. This is largely why the market surged Thursday.
ADP was scheduled to release its national employment report Thursday but has put it on hold until August 31 to retool its methodology.
Meanwhile, the US trade deficit narrowed to $85.5 billion in May from $86.7 billion in April, compared with estimates for an $84.7 billion gap.
In company news, Caterpillar (CAT) shares rose 4.6% Thursday, rebounding from Wednesday's 52-week low, and was the top gainer on the Dow.
