April so far has been a strong month with the S&P500 moving up around 8% since late March. The XJO has gained 5%. Earnings in the US are continuing to recover and beat expectations. Economic data is also improving but not at a pace that investors are worried about increasing rates. This week will be another big week for US reporting with many of the FANG stock reporting.
What the US markets do next will depend on the rest of the reporting season, and how Biden’s $2 trillion infrastructure bill plays out. Biden aims to approve a package in the coming months that revamp U.S. roads, bridges, airports, broadband, housing, utilities, and invests in job training along with care for elderly and disabled Americans. Republicans have signaled they could support a scaled-back bill based around transportation, broadband, and water systems.
The typical seasonal pattern for the markets is a rise into May and then ‘Sell in May and Go Away’. This means more times than not May is a bearish month. A correction in May is also common to see, especially if we see a strong move up into the pullback. Timing is always key it could come earlier or later watch the 4116 levels on the SP500.
The XJO is expected to open flat this morning. Considering we were rather out of character on Friday, holding up despite strong falls in the U.S session the night before, it is not surprising we aren’t rallying on the back of the U.S recovery on Friday either. Ultimately, the whippiness is resulting in markets tracking sideward, with no gains or losses to move us one way or the other.
Our session today will likely be dictated by how U.S futures trade. As of writing, they too remain flat, giving our market little indication on how they may trade tonight. If they have a decent swing one way or the other today, expect our market to follow.
7000 seems to be acting support at the moment as we consolidate, with roughly 7100 also keeping a lid on things. Its reasonable to suggest there is one more leg up back to our all-time high near 7200, though as we approach May, cyclically we would be expecting some variation of an aggressive pull back.
The U.S continues their reporting, with many stocks due to give their earnings and guidance this week. In addition, GDP and jobless claims are due for the U.S on Thursday which may affect sentiment about inflation and interest rates.
US shares pushed higher on Friday, with the flagship S&P 500 reaching its highest ever levels on Friday, before pulling back slightly from its peak. It was still the second highest close ever for the index after a strong day of trading. US earnings season is ongoing, with this week a major week for reporting companies; most of the large tech stocks will report earnings this week and over 40 percent of the S&P 500’s capitalisation will deliver reports.
US economic data was largely positive on Friday, with better than expected manufacturing and services PMIs and better than expected new home sales numbers. Basic Materials, Technology, and Financials stocks were the strongest performers on Friday, while just about every other major sector closed higher.