US Stock Rally Could Cool As Focus Shifts To Q2 GDP, Private Jobs Data: Why This Analyst Says September Won’t See Late-Summer’s Weakness

Trading in the futures market suggests a pause in the rally as stocks come into Wednesday’s session with a three-session winning streak intact. The tech space could come under selling pressure from earnings-related sell-offs from companies such as HP, Inc. (NYSE:HPQ). The spotlight continues to shine on Main Street readings, with the focus shifting to the results of ADP’s private payrolls report and the preliminary second-quarter GDP data.

Cues From Tuesday’s Trading:

Bad news on the economy was digested as good news by the market on Tuesday, as traders bid up stocks on hopes of a rate pause. The Labor Department’s monthly “Job Openings and Labor Turnover” survey showed that job openings fell to the lowest level in over two years.

The Conference Board’s consumer confidence index fell by much more than expected in August, reflecting a setback to consumer mood. Bond yields pulled back in reaction to the data, reflecting tempered rate-hike expectations.

The averages opened lower but reversed course in early trading as the economic reports dropped in. After a sharp spike through the early afternoon trading, the indices closed notably higher for the session.

The Nasdaq Composite and the S&P 500 indices ended at their highest levels since early August, while the Dow Industrials settled at a two-week high.

The market witnessed across-the-board strength, led by communication services, IT, and consumer discretionary stocks.

US Index Performance On Tuesday

Index Performance (+/-) Value
Nasdaq Composite +1.74% 13,943.76
S&P 500 Index +1.45% 4,497.63
Dow Industrials +0.85% 34,852.67
Russell 2000 +1.42% 1,895.54
Analyst Color:

The tech sector once again led the recent resurgence, said fund manager Louis Navellier. The fund manager noted that “Magnificent Seven” mega techs rebounded nicely and the CBOE volatility index extended its slide seen since mid-month.

“Stocks are staging a very nice rebound off the August lows and give hope that the weak seasonality of late summer won’t be repeated in September,” said Navellier.

Futures Today

Futures Performance On Wednesday

Futures Performance (+/-)
Nasdaq 100 -0.17%
S&P 500 -0.09%
Dow -0.08%
R2K -0.32%
In premarket trading on Wednesday, the SPDR S&P 500 ETF Trust (NYSE:SPY) edged down 0.06% to $448.89 and the Invesco QQQ ETF (NASDAQ:QQQ) fell 0.16% to $374.18, according to Benzinga Pro data.

Upcoming Economic Data:

The Mortgage Bankers Association will release its weekly mortgage application volume data at 7 a.m. EDT. Data for the week ended Aug. 18 showed that mortgage applications fell a seasonally adjusted 4.2% week-over-week, as the 30-year mortgage rates spiked to 7.31% amid the spike in Treasury yields.

ADP is scheduled to release its private payroll data for August at 8:15 a.m. EDT. Economists, on average, expect payroll growth of 195,000 in the month, markedly slower than the 324,000 jobs added in July.

The Bureau of Economic Analysis will release the second estimate of second-quarter GDP at 8:30 a.m. EDT. The consensus estimate calls for the quarter-over-quarter growth to be revised upwardly from the advance estimate of 2.4% to 2.6%. Traders may also keep an eye on the GDP price index and the core personal consumption expenditure index, which are both measures of inflation.

The BEA will also release a report on second-quarter corporate profits at 8:30 a.m. EDT.

The National Association of Realtors will release the pending home sales index for July at 10 a.m. EDT. The index may have fallen 0.6% month-over-month in July following a 0.3% increase in June.

The Energy Information Administration will release its weekly petroleum status report at 11 a.m. EDT.

See also: How To Trade Futures

Stocks In Focus:

HP which reported its quarterly results Tuesday after the close, fell over 8% in premarket trading.
Other stocks reacting to their quarterly results include Box, Inc. (NYSE:BOX) (down over 9%) and Ambarella, Inc. (NASDAQ:AMBA) (down nearly 20%).
Brown-Forman Corporation (NYSE:BF) and Patterson Companies, Inc. (NASDAQ:PDCO) are among the companies due to release their quarterly results before the market opens.
Those reporting after the close are Salesforce, Inc. (NYSE:CRM), CrowdStrike Holdings, Inc. (NASDAQ:CRWD), Okta, Inc. (NASDAQ:OKTA), Chewy, Inc. (NYSE:CHWY), The Cooper Companies, Inc. (NYSE:COO) and Victoria’s Secret & Co. (NYSE:VSCO)
Commodities, Bonds, Other Global Equity Markets:
Crude oil futures rose 0.75% to $81.77 in early European session on Wednesday after Tuesday’s 1.32% rally.

The benchmark 10-year Treasury note rose 0.027 percentage points to 4.149% on Wednesday.

The major Asian markets ended Wednesday’s session on a lackluster note, as investors’ focus remained on China’s economic trajectory and another slew of data releases from the U.S. The Australian market, however, advanced notably after tamer inflation data increased hopes of an interest rate cut.

While most other markets in the region advanced modestly, the New Zealand, Malaysian, Singaporean, and Hong Kong markets edged lower.