Last week was a wild week in the market, with the FED confirming a pause in rates the Markets took that as a license to blast off. This combined with a better-than-expected inflation number helped push the S&P 500 ($SPX) (SPY) back over $440.00 to close the week up over 2%.
Individual stocks were not left out of the fun Netflix (NFLX) closed up 2.84% even with their sharing policy slowly going into effect and fan favorite Tesla (TSLA) closing up over 6% on the week at around $260.00.
This upcoming week has a long weekend in the US with Monday being a bank holiday, but there are still plenty of releases to watch. Here are 5 themes to watch in the market this week:
Bank Holiday
Monday is a newer holiday in the US, Juneteenth so there will be reduced trading this week. Mix this in with the usual summer trading and it's possible that the whole week has lower-than-expected volume. This can lead to some whippier markets as there is less liquidity to absorb any potential news-related moves that happen.
Building Permits:
Building permits are a key indicator of demand in the housing market. A higher number of building permits could suggest an increase in construction activity in the future, indicating a strong economy. This could be seen as positive by the market as a whole and positive for stocks. If you mix this with the recent news of a rate pause it's possible we see a continuation of the recent rally.
Housing Starts
Housing starts measure the annualized number of new residential construction projects that have begun during the past month. Much like building permits, a strong number here would suggest that there is still a strong economy in the US. This could be seen as positive by the market overall and help contribute to a sustained rally. Both Housing Starts and Building Permits are more macro indicators though, so it's possible we do not see an immediate effect from these reports. They should help steer a general thesis of the market though.
Existing Home Sales
Much like the last two reports, Existing home sales is a marco indicator of the strength of the housing market in the US. This will continue to help build out a general thesis on the strength of the overall economy as well since for most people, a house is the largest purchase they plan to make. A beat here would show that there is demand in the housing market, even with the higher rates. This could be seen as a positive by the market. Conversely, if we miss and see that there was a cool-off in demand for real estate, it could signal that there is potential weakness ahead of the economy overall.
Rate Hike Pause
This is less a news release since it happened in last week's FED meeting, however, it's possible that the market continues to see this as a reason to celebrate and we keep seeing prices rise. It should be noted that in the past when a pause has happened after a campaign of rate hikes, a recession has followed. While it's possible this time is not the same, it is something to be aware of in your trading. This is very time horizon dependent though, as a short-term trader we should trade what we see on the charts.
Best of luck this week and don’t forget to check out my daily options article.
On the date of publication, Gavin McMaster did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
