logo-loader

Nasdaq and S&P 500 poised to reverse 7-week slide after Thursday surge

Last updated: 21:10 26 May 2022 BST, First published: 11:45 26 May 2022 BST

Two traders look at a stock chart on a computer

4:10pm: Dollar Tree stock drives Nasdaq higher

The Dow closed Thursday up 518 points, 1.6%, at 32,638, the Nasdaq improved 306 points, 2.7%, to 11,741, and the S&P 500 added 79 points, 2%, to 4,058.

Shares of Dollar Tree Inc helped the Nasdaq, rocketing more than 20% higher to $162.80 after reporting an earnings beat.

If things hold tomorrow, the Nasdaq and S&P 500 will reverse 7-week losing streaks. That's a sign that last week's pessimism may have been worse than warranted, according to LPL Financial Chief Equity Strategist Quincy Krosby.

“Although this was an expected and highly talked about potential ‘oversold’ rally, the underpinning for today’s market climb higher, suggests that last week’s doom and gloom about the all-important US consumer may have been overdone, along with the dire recession headlines,” Krosby said, as reported by CNBC.

12:05pm: Markets rebound at midday

US stocks had risen at noon spurred by a rebound in retail earnings following last week’s disappointing performance by Walmart Inc (NYSE:WMT) and Target Corporation (NYSE:TGT), among others. 

At midday, the Dow had gained 489 points or 1.5% at 32,610 points.

The S&P 500 was up 71 points or 1.9% at 4,050 points, while the Nasdaq had jumped 263 points or 2.3% at 11,698 points.  

Leading the retail rebound was Macy’s Inc, which was up about 15% at noon after posting better-than-expected earnings despite inflation pressures on consumers.

The company posted an adjusted profit of $1.08 per share, exceeding the consensus analyst expectation of $0.82 per share, and an increase in revenue of $5.4 billion for the quarter compared to $4.7 billion last year.

US-listed shares of Chinese ecommerce giant Alibaba Group (NYSE:BABA) Holding Limited had also surged about 14% after the company topped earnings for its latest quarter.

US dollar store chains Dollar Tree Inc and Dollar General Corp were up 19% and 12% respectively noon, after both raised their sales expectations for the year as high inflation has encourage Americans to go bargain-hunting.

OANDA analyst Edward Moya noted inflation was hitting low-income household the hardest and Dollar General seemed to be benefitting, despite ongoing uncertainty arising from product cost inflation and continued pressure in the supply chain.

“If Dollar General was cutting guidance, that would be very troubling for betting on the US consumer,” Moya said.

After dropping sharply this morning, Apple Inc (NASDAQ:AAPL) stock had also made it into positive territory at noon, up about 2%.   

The dip came as the company announced its production plans for the iPhone would remain flat at 220 million this year, below the market expectation that the company would produce 240 million iPhones.

“This could be a canary in the coal mine when it comes to how this year might pan out, and a demand slowdown,” said CMC Markets UK chief market analyst Michael Hewson.

"With the various supply chain problems showing little sign of clearing given the problems in China, production numbers could come down, while Apple’s costs look set to rise.”

IG chief market analyst Chris Beauchamp noted another relief bounce was underway in equities on Thursday in the wake of yesterday’s Fed minutes, but questions lingered over how long it would last.

“While these minutes didn’t really add much to the outlook for monetary policy, they did at least calm fears that a faster pace of tightening is on the way,” Beauchamp said.

“But beyond bargain hunting there seems little concrete rationale for the bounce, which leaves investors wondering whether next week will see yet another dramatic reversal in stocks.”

11.45am: Proactive North America headlines:

Sigma Lithium announces integrated Phase 1 & 2 technical report with post-tax net present value of $5.1B and continued advancement of Phase 3

Clean Seed Capital receives orders for its SMART Seeder MAX from Saskatchewan’s Canada West Harvest Centre

Revive Therapeutics receives positive feedback from FDA about potential new endpoints for its Bucillamine clinical trial to treat COVID-19

Adyton Resources (TSX-V:ADY, OTCQB:ADYRF) welcomes initial metallurgical testing on Gameta ore, which shows high recoveries and potentially low processing costs

Aurelius Minerals delivers robust maiden mineral resource estimate at Aureus East gold project in Nova Scotia

Co-Diagnostics (NASDAQ:CODX) develops principal design work on monkeypox PCR test

Camino Minerals kicks off drilling at new Lourdes-Condori copper zones at its Los Chapitos project in Peru

Thunderbird Entertainment appoints Kitty Walsh as executive director of development of its kids and family division Atomic Cartoons

Hapbee Technologies CEO says its platform is gaining traction in the rapidly-growing sleep technology market

BioSig targets July 1 to launch national PURE EP commercial campaign

Bridgeline Digital says its Celebros site search product selected by retailer Michael Murphy Sports and Leisure

Lion Copper and Gold announces termination of previously announced sale of water rights and financing of up to US$2M

Clean Air Metals finds palladium, platinum, copper and nickel in new drill assays at Thunder Bay North project

Ayurcann Holdings sees fiscal 3Q revenue rise to $2.8M as it gains more traction in the market

Pacific Empire Minerals finalizes drill targets for upcoming exploration program at Jean Marie copper project in British Columbia

ReVolve Renewable Power inks deal to acquire power producer Centrica Business Solutions Mexico

CO2 GRO Inc (TSX-V:GROW, OTCQB:BLONF) and Mexican sales partner announce second greenhouse trial

Albert Labs appoints Dr Sara Tai as principal investigator for its upcoming trial on KRN-101

Wishpond Technologies sees 41% jump in 1Q revenue driven by acquisitions and organic growth

New Age Metals (TSX-V:NAM, OTCQB:NMTLF) to advance Manitoba lithium projects with approval of $1.8M exploration program by partner Mineral Resources

CULT Food Science secures space for incubation studio in Ontario; appoints food scientist Dr Kantha Shelke to its advisory board

Empower Clinics receives accreditation for mobile services for its COVID-19 testing solutions in British Columbia

Think Research expects to realize $9M in cost synergies by end-2022

Ortho Regenerative Technologies says awarded $500,000 grant to advance the development of its ORTHO-M platform for meniscus repair

Vox Royalty (TSX-V:VOX) unveils 2022's royalty revenue outlook; acquires producing royalty over iron ore mine in Western Australia

Pure Gold Mining closes the first tranche of its non-brokered private placement for aggregate gross proceeds of C$27,760,944

enCore Energy completes sale of Cebolleta Uranium Project to Future Fuel Corporation

AMPD Ventures forecasts doubling of FY2022 revenue as strong Q3 trading continues into Q4

Minto Metals hails first quarter performance as it boosts copper output by 71% at its Yukon mine

American Manganese begins first stage testing of its RecycLiCo demonstration plant

Prospector Metals acquires 100% interest in largely unexplored Leopard Lake Property

9:40am: US stocks mixed at the open  

US stocks opened mixed on Thursday morning as investors progressed with caution amid ongoing concerns about slowing growth and likely interest rate hikes over the coming months.

Shortly after the open, the Dow had gained 222 points at 32,343 points and the S&P 500 was up 13 points at 3,992 points.

The Nasdaq, however, had shed 28 points at 11,406 points.

Just after the open, Twitter Inc (NYSE:TWTR) was up about 4% after jumping in pre-market trading following the news that Tesla Inc (NASDAQ:TSLA) CEO Elon Musk has revised the financing plans for his $44 billion purchase of the social media platform.

In a new regulatory filing, Musk said he would seek $13 billion in loans for the purchase instead of using twice as much debt as previously indicated.

Meanwhile, new employment data confirms the US labor market remains tight as jobless claims trend slightly upwards, coming in at 210,000 below the consensus analyst estimate of 215,000.

Pantheon Macroeconomics chief economist Ian Shepherdson said the trend in claims was rising slowly, with it unlikely to be changed next week but a jump to 230,000 was expected after that.

“Even at that level, though, claims would remains very low by historical standards, and a long way from signalling any sort of distress in the labor market,” he said.

“Still, the uptick is consistent with the idea that payroll growth is slowing, and the Homebase data for the May payroll survey week are consistent with an increase of about 250,000, after 428,000 in April.”

6.30am: Caution seen prevailing

US markets are expected to open mixed on Thursday as investors proceed cautiously after the rally yesterday.

While there is lingering positivity from Wednesday’s news that US rate-setters had not considered a 75-basis-point rate increase at their recent meeting, wider concerns over the prospect of slowing growth amid a higher interest rate environment continue to simmer away in the background, keeping market direction uncertain.

Futures for the Dow Jones Industrial Average rose 0.3% in Thursday pre-market trading, while those for the broader S&P 500 index gained 0.2% but the Nasdaq shed 0.04%.

“FOMC Minutes, released overnight, settled a few nerves temporarily, signalling another couple of 50bps rate hikes in June and July before a pause in September,” said Jeffrey Halley, senior market analyst at OANDA.

“The dreaded 75bps hike threat was off the agenda and with some slowdowns in recent US data, notably in the housing market, it was enough to spur a relief rally of sorts in US equities and the US dollar,” he added.

The twin concerns that inflation is still too high and that the US Federal Open Market Committee’s aggressive path for interest rates will take a toll on the economy, and in turn, corporate bottom lines, remain a mainstay.

On the economic data front, US Pending Home Sales will be closely watched given the weakness in recent existing and new home sales data.

“That will overshadow second estimate of Q1 GDP and Initial jobless Claims. Another ugly number will put the recession word back on Wall Streets' lips and we could see another rush for the exit. Soft results from Gap and Dollar tree could reinforce that sentiment,” said Halley.

The initial estimate for US first-quarter GDP was a 1.4% contraction. If the headline figure is adjusted to show a wider contraction, equity markets could be in for a rough ride.

“Overall, though, it looks as if today will be a day of consolidation for financial markets as they await fresh inputs, and ahead of personal income and expenditure data out of the US tomorrow evening,” he added.

Elsewhere, earnings from Chinese tech giants Alibaba and Baidu, due today, will be closely watched.

In the energy markets, the WTI crude oil futures rose 0.96% to $111.39 a barrel and the Brent crude futures added 0.72% to $114.85.

Contact the author at jon.hopkins@proactiveinvestors.com

Chesnara reports strong 2023 results with improved cash generation and...

Chesnara PLC (LSE:CSN) chief executive Steve Murray discusses the company's full-year results for 2023 with Proactive's Stephen Gunnion, describing them as strong and particularly highlighting £53 million in commercial cash generation and a dividend coverage of around 150%. The company has...

37 minutes ago