VIDEO: 3 Days of Big Reports and Why We’re Eyeing These Key S&P 500 Chart Levels
Data and comments will determine if we have new support or just technical resistance.
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Today's the start of three days of big, potentially market moving, economic reports, and in this Daily Rundown Video, Chris Versace discusses what the Pro Portfolio will be closely watching.
The team will be tracking comments from Fed Chair Powell tomorrow, Walmart’s WMT guidance on Thursday, and company comments at investor conferences throughout the week. They'll also review the National Federation of Independent Business' Small Business Optimism Index in the context of the latest tariff news. As Versace explains, while the headline April Consumer Price Index data surprised to the downside, the insights from those comments will give clues about the market's direction.
It will also influence whether the S&P 500 will move past recent technical levels or if they could become levels of resistance. He notes the effects of yesterday's rally on the charts and what technical levels that should be retested.
Transcript
CHRIS VERSACE: Folks, Chris Versace. It is, Tuesday, May 13, a day that begins, we can only call it the way it is, three days worth of notable items for the economy and, therefore, the market. Kicking it off, many are focused with the April CPI report that came out at 8:30, which was on some respects better than expected, on some respects as expected. We'll talk about it in a minute.
But first, let's talk about that NFIB Small Business Optimism Index. Did it move lower in April? Yes, it did. Was uncertainty flagged and did that subindex move higher month over month? It sure did.
But are we surprised? No, we are not. Why? What happened in April? As we all know, tariffs. But, but, and here's the thing, I think the market is largely going to ignore that NFIB Small Business print for the month of April because of developments on the trade front that were discussed a little bit over the weekend, but much more so yesterday.
And that's going to have the market kind of digging a little more into the April CPI report. Again, published this morning, headline came in slightly better than expected. Up year-over-year 2.3%. Consensus was 2.4%, so down slightly.
However, core CPI remained unchanged, up 2.8% year-over-year. Now, on the one hand, we would say unchanged compared to the month of March. But it was also the second month below 3%.
If you look back on a chart over the prior several months, way over 3%. So on the other hand, some nice progress. But what's the difference between the headline CPI and the core CPI? We could trace it back to one very simple factor, energy prices.
Remember, core excludes what are called volatile food and energy prices. And when we trace back the drop in oil prices that we saw during the month of April, we can start to see the big difference between headline and core CPI. But are we starting to see oil prices rebound? Yes, we are.
Why? Well, also due to the developments on the trade front between US and China, and the thinking that the economy is not going to fall off a cliff. So we have to kind of balance this out.
But as we think about this and net it out, was this April CPI report incrementally favorable? A little bit. Is it enough to dissuade the Fed and Fed Chair Powell from saying, the Fed is going to remain data dependent, as the Fed heads make the rounds this week, including Fed Chair Powell tomorrow? I don't think so.
I don't think so. And the reason being is kind of simple. Yes, what we saw on the US-China trade front is a rollback of tariffs. But there are still tariffs in place that were not there at the beginning of the year, which means that there are still some incremental inflationary pressures out there. And I think the Fed is going to want to see how this plays out.
There's also some questions about the timing for other trade deals. And remember, that not to be a cynic, but what we heard announced between the US and China is a 90-day window. There could, as we discussed yesterday, be some incremental bluster along the way from both sides that spooks the market. But ultimately, the final trade deal terms will be what matters.
And I wouldn't be surprised if the Fed, if the data is still kind of conflicting, continues to reiterate that it wants to see what the eventual data has to say, not only about inflation, but also its other mandate for maximum employment. So I think we're going to hear that from Fed Chair Powell tomorrow. To us, the comments that we really want to walk away from that we think will give us meaningful insight this week are going to be those from Walmart.
One, it's going to give us another update on the tone of the consumer. But how they discuss the impact of what we're seeing with falling port cargo in the near term. How they interpret the developments on the US-China trade front. That's going to be important. It's going to set the tone from what we hear from other retailers.
We will also be listening this week to what companies have to say as they make the rounds at various investor conferences. Remember, we're about halfway through the current quarter. Not quite, just about. But we will also want to hear what they have to say about trade and the recent update between the US-China trade developments and tariffs being de-escalated.
So it's really those two things that we're going to want to pay very close attention to coming out of these investor conferences, as well as any other update on demand drivers, any comments on the dollar, input costs, all of that. So it's going to be a busy set of days for us. It's also going to be another busy set of days next week when we have, honestly, more of the same-- more retailers and more investor conferences. So we're going to have a lot to chew through, updating our thoughts as we go through it.
But as we do that in the next few days, and this is key, we are going to watch the key technical levels for the S&P 500. Yesterday's rally pushed the S&P 500 past the 100-day, past the 200-day moving average. Now, on the one hand, this would be viewed as rather bullish. However, we also know that to get greater confidence in the market move, we will want to see the S&P 500 retest some of those technical levels.
Now, the data that we have in the next couple of days-- we've got the April retail sales report. We've got Fed Chair Powell and other Fed heads making comments. We've got Walmart earnings. We've got investor conferences.
There's going to be a lot of information coming our way that could lead to a successful retest or maybe not. And if it doesn't, then the question becomes, is it the S&P 500 100-day moving average that's resistant? Is it the 200-day moving average that's resistant?
So while we have enjoyed and benefited from the sharp move higher yesterday, there are some things on the near-term horizon that we're going to want to watch very carefully, because it's going to help us navigate where we go from here. What this means, my friends, is that we are going to have a lot of stuff coming your way. We will have breaking comments, breaking down all those things I just mentioned. We're also going to have some other comments on Apple's roadmap and some other things that I think you might find kind of interesting.
So I would say, please, continue to check your emails and your alerts. You're going to want to get our latest thoughts, as we continue to update them as more information becomes available. Thanks for watching.
