FX.co ★ US stock market poised for correction

S&P 500

Market overview for March 18, 2024

US market: correction

Major US indices on Friday: Dow -0.5%, NASDAQ -1%, S&P 500 -0.7%, S&P500 at 5,117, trading range 5,060 - 5,180.

The stock market closed this quarterly option expiration day on a weak note, with trading volume on the NYSE above average.

The Dow Jones Industrial Average (-0.5%), S&P 500 (-0.6%), and Nasdaq Composite (-1.0%) closed with losses but not at daily lows. Increased selling activity was partially due to a correction, leading to a decline in shares of many companies.

The equally weighted S&P 500 index fell by 0.2%, and 23 of the 30 Dow components closed lower. Nevertheless, the market showed signs of resilience to selling efforts, as has generally been the case in 2024.

The AD line did not show a strong bias towards any side of the tape. Moreover, the Russell 2000 index added 0.4% thanks to a rise in energy companies' stocks and regional bank stocks.

This also led to a 0.2% rise in the S&P 500 energy sector and a 0.5% gain in SPDR S&P Regional Banking ETF (KRE).

Besides energy, the utilities (+0.1%), materials (+0.1%), and industrials (+0.1%) sectors grew, while the other seven sectors experienced a decline.

The relative weakness of the mega-cap sector led to the information technology (-1.3%), communication services (-1.2%), and consumer services (-1.1%) sectors ending up at the bottom of the leaderboard. Sharp declines in earnings for Jabil (JBL 123.15, -24.31, -16.5%) and Adobe (ADBE 492.46, -77.99, -13.7%) also added to a downturn in the information technology sector.

The price movement of treasury bonds also contributed to the downtrend in the stock market. The yield on 2-year bonds increased by three basis points to 4.72%, and the yield on 10-year bonds rose by one basis point to 4.30%.

S&P 500: +7.3% since the beginning of the year.

NASDAQ Composite: +6.4% since the beginning of the year

S&P Midcap 400: +5.1% since the beginning of the year.

Dow Jones: +2.7% since the beginning of the year.

Russell 2000: +0.6% since the beginning of the year.

Today's economic data analysis:

February Import Prices: 0.3%; Previous: 0.8%

February Import Prices excluding oil: 0.2%; Previous: 0.7%

February Export Prices: 0.8%; Previous: revised to 0.9% from 0.8%

February Export Prices excluding agriculture: 0.8%; Previous: revised to 1.1% from 0.9%

March New York Federal Reserve Manufacturing Activity Index: -20.9 (Consensus: -8.0); Previous: -2.4

February Industrial Production: 0.1% (Consensus: 0.0%); Previous: revised to -0.5% from -0.1%;

February Capacity Utilization: 78.3% (Consensus: 78.4%); Previous: revised to 78.3% from 78.5%.

The key takeaway from the report is that industrial production saw a notable increase in February, partially reversing the decline recorded in January. Despite the February rise, the volume of industrial production remains 0.7% lower on an annual basis.

March Preliminary Michigan Consumer Sentiment Index: 76.5 (Consensus: 77.3); Previous: 76.9.

The main conclusion from the report is that overall sentiments in 2024 have changed slightly and remain halfway between the low reached in June 2022 and pre-pandemic highs.

Monday's macroeconomic calendar is bereft of any important news releases, except for the March NAHB Housing Market Index (Consensus: 49; Previous: 48).

ABT shares fell as its counterpart Reckitt Benckiser (RBGLY 11.38, -1.93, -14.50%) reached an 11-year low this morning in light of a $60 million fine over a baby food-related death lawsuit. SYF and INTU shares also dropped despite a lack of corporate news.

Meanwhile, real estate company CoStar Group (CSGP 94.23, +6.36, +7.24%) topped the S&P index after investors focused on potential beneficiaries of today's NAR decision.

Gold traded downwards as expectations regarding a rate cut in June eased slightly.

Gold futures fell by $6.00 (-0.3%) to $2,161.50 an ounce, down -1.1% this week. The core CPI data helped soften sentiments regarding a rate cut in June. Meanwhile, the US Dollar Index rose by about +0.1% to $103.49.

Energy: Brent crude oil rose above $85 to settle at $85.70.

Conclusion: Correction sentiment in the US market has intensified. So, the market may well see its first full-fledged correction in the last four months, not seen since mid-November.