U.S. stocks are poised for a cautious start on Friday as concerns about rising interest rates return. Traders are waiting for a significant catalyst to propel the market higher after its recent record run. A potential resumption of the meme stock rally could inject support into the small and mid-cap (SMID-cap) space. Traders will be closely watching the Conference Board’s leading economic index data and bond yields for clues on future market direction. 

Barring a significant downturn, the major indices are still on track to close the week with gains. A series of Federal Reserve speeches scheduled for next week could provide further insight into the central bank’s plans for interest rates.

Futures Performance (+/-)
Nasdaq 100 +0.06%
S&P 500 -0.01%
Dow +0.01%
R2K -0.09%

In premarket trading on Friday, the SPDR S&P 500 ETF Trust SPY ticked down 0.01% to $528.64, while the Invesco QQQ ETF QQQ traded up 0.05% at $452.21 according to Benzinga Pro data.

Cues From Previous Session

Stocks paused for a breather on Thursday but not before the major indices scaled new intraday peaks. The market experienced some degree of profit-taking as traders digested separate reports showing a rise in jobless claims, sub-par industrial production data, and a spike in import prices.

The major averages were little changed for the bulk of the session before settling marginally lower for the session. In a noteworthy development, the Dow Jones Industrial Average broke above the psychological resistance of 40,000 for the first time. All but consumer staple stocks ended lower for the session, with Walmart, Inc.’s WMT post-earnings rally giving the sector a boost.

Lauding Dow’s climb past its record peak, John Lynch, Chief Investment Officer for Comerica Wealth Management, said, “This achievement is a testament to the powers of capital formation, innovation, profit growth, and economic resilience.”

Index Performance (+/-) Value
Nasdaq Composite -0.26% 16,698.32
S&P 500 Index -0.21% 5,297.10
Dow Industrials -0.10% 39,869.38
Russell 2000 -0.63% 2,096.25

Insights From Analysts:

Comerica’s Lynch sees the momentum continuing. “The recent technical momentum and fundamental strengths, including earnings and interest rates, suggest further near-term gains,” he said. That said, the analyst sounded a note of caution regarding potential headwinds. “Investors should be careful not to sprint on the victory lap, though, as a combination of geopolitics, valuation, and market interest rates may lead to a sudden directional shift.”

Chris Zaccarelli, Chief Investment Officer at Independent Advisor Alliance, also suggested caution. “We are in a Bull Market and people are showing some irrational exuberance (meme stocks) and dismissing bad news (slowing retail sales) and focusing on good news (slightly slowing inflation),” he said.

As the markets are now headed into overvalued territory, the analyst said it’s prudent to dollar cost average and be more discerning when investing in equities. “We wouldn’t just buy the whole index at this point,” he added.

Fund manager Louis Navellier sees investors lapping up any pullback as potential buying opportunities. “As we push through new highs the fear of missing out remains very high but concerns that you’ve already missed the move leaves some investors reluctant to add here,” he said. “It remains likely that if we do pull back there will be plenty of buyers of the dip until that strategy backfires.” 

Upcoming Economic Data:

  • The Conference Board will release its leading economic index for April at 10 a.m. EDT. Economists, on average, expect the index to see a 0.3% month-over-month decline, the same pace of drop as in the previous month.
  • Fed Governor Christopher Waller is scheduled to speak at 10:15 a.m. EDT.

See Also: How To Trade Futures

Stocks In Focus:

  • Take-Two Interactive Software, Inc. TTWO fell over 2.50% in premarket trading following its results announcement, while Doximity, Inc. DOCS jumped about 14%.
  • DXC Technology Company DXC slumped over 22% on earnings.
  • Meme stocks GameStop Corp. GME and AMC Entertainment Holdings, Inc. AMC may resume their climb after their two-session slump. The two were up about 7.5% and 4.5%, respectively, in premarket hours. Robinhood Markets, Inc. HOOD climbed over 6%.

Commodities, Bonds, and Global Equity Markets:

Crude oil futures could extend their two-session winning streak, as they traded modestly higher, and gold futures also ground higher, with the yellow metal poised to retest the $3,400 level.

The 10-year U.S. Treasury note yield is higher for a second straight day, up 1.2 basis points at 4.389%.

After retreating below the $66k mark on Thursday, Bitcoin BTC/USD was back above the level.

Asian stocks closed mixed, as traders in the region weighed in on the negative lead from Wall Street overnight and weak retail sales and fixed investment data out of China. Chinese and Hong Kong stocks rallied, apparently on hopes the central bank will lavish more stimulus to kickstart the economy.

Meanwhile, major European markets were in the red in early trading.

Read Next: Is The New Meme Stock Rally Led By GME, AMC A Repeat Of 2021? Vanda Research Says No: ‘Chances We Reach That Stage Are Low’

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