September 29, 2023

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Stock futures were little changed after the best week for the S&P 500 since March

Traders on the floor of the New York Stock Exchange, July 12, 2022.

Source: NYSE

US stock futures were mixed Monday morning after a broad rally last week that pushed the S&P 500 to its best week since March, and its highest level since last August.

Futures related to the Dow Jones Industrial Average added 29 points, or 0.09%. S&P 500 futures were down 0.07% and Nasdaq-100 futures were down 0.3%.

Oil prices briefly rose more than 2% after Saudi Arabia announced it would cut production by 1 million barrels per day starting in July. The news came on the heels of a meeting of OPEC and its allies, during which the group decided to adhere to current production targets for 2023. The jump in crude oil prices faded on Sunday evening, as US Brent and West Texas Intermediate crude futures rose by about 1%.

On Friday, stocks ended the week higher after the strong jobs data for May. The Dow Jones index jumped 701.19 points, or 2.12%, in its best day since January, to end the week at 33,762.76 points. The S&P 500 rose 1.45% to 4,282.37, while the Nasdaq Composite rose 1.07% to 13,240.77, marking its sixth consecutive weekly advance.

Over the weekend, President Joe Biden signed a debt ceiling bill into law, averting a potentially catastrophic deficit by the US government.

Investor sentiment was high on Friday after the explosion in non-farm payroll growth in May reported by the Labor Department. Public and private sector payrolls increased by 339,000 in May, compared to a Dow Jones estimate of 190,000, average hourly earnings rose at an annualized rate of 4.3%, slightly less than economists expected, and the average workweek fell slightly. The report eased concerns about an impending recession.

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“Although a number of leading indicators point to a recession imminently rising, continued strength in the labor market and stubborn levels of personal consumption are propelling the headway into the future,” said Mace McCain, chief investment officer at Frost Investment Advisors.

“We don’t think the economy can slip into recession until employment weakens materially,” he added. “The unemployment rate has increased with every decrease in employment going back to the 1950s [has] Did not happen after this cycle. This trend may continue, thus delaying the recession.”

More than that, investors are focused on what has so far proven to be a narrow stock market rally in 2023, led by the handful of technology stocks that have been carrying the rest of the market, and whether there could be a correction in the medium term if breadth does not improve.

“The big question is whether the breadth of the range can continue to improve, which could breathe new life into what has been a very narrow climb,” Young Yu Ma, senior investment analyst at BMO, told CNBC.

He added, “Recent developments in the banking sector are also encouraging, and frequent signals of labor market strength reduce negative risk outcomes. Monday’s services PMI and factory orders numbers could help reinforce the positive narrative.”

Meanwhile, after a intense month of first-quarter earnings, the agenda is much lighter next week. Investors will take a look at food prices and demand from JM Smucker, Campbell Soup and United Natural Foods. Stitch Fix, Signet Jewelers, and DocuSign are also slated to report findings.

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In economic data, traders will have May PMI data from both the Institute for Supply Management and S&P Global on Monday, as well as April Factory Orders and Durable Goods. On Wednesday, the Mortgage Bankers Association will release its latest data on home loan applications.