Traders on the floor of the NYSE, July 12, 2022.
U.S. stock futures were mixed on Monday morning after a broad-based rally last week pushed the S&P 500 to its best week since March and its highest level since last August.
Futures tied to the Dow Jones Industrial Average returned 29 points, or 0.09%. S&P 500 futures were 0.07% lower and Nasdaq 100 futures fell 0.3%.
Oil prices briefly rose more than 2% after Saudi Arabia announced it would further cut production by 1 million barrels per day starting in July. The news followed a meeting of OPEC and its allies, where the group decided to stick with existing production targets for 2023. The jump in crude oil prices eased on Sunday night, with both Brent and US West Texas Intermediate futures last trading around 1% higher .
On Friday, stocks rose to end the week after strong May jobs data. The Dow jumped 701.19 points, or 2.12%, for its best day since January, ending the week at 33,762.76. The S&P 500 rose 1.45% to 4,282.37, while the Nasdaq Composite climbed 1.07% to 13,240.77, posting its sixth straight weekly gain.
Over the weekend, President Joe Biden signed the debt ceiling bill into law, averting a potentially catastrophic default by the US government.
Investor sentiment was high Friday after the blowout in May wage growth reported by the Labor Department. Public and private sector wages rose 339,000 in May, compared with the Dow Jones estimate of 190,000, average hourly wages rose at an annualized rate of 4.3%, slightly less than economists expected, and the average workweek fell a fraction. The report eased concerns about an impending recession.
“Despite the growing number of leading indicators that indicate a recession is imminent, continued strength in the labor market and stubborn levels of personal consumption are pushing the start further down the road,” said Mace McCain, chief investment officer at Frost Investment Advisors.
“We don’t think the economy can tip into recession until employment weakens significantly,” he added. “Unemployment has risen with every decline in vacancies going back to the 1950s, but [has] yet to happen this cycle. This trend may continue, thus delaying the recession.”
More than that, investors are focused on what has so far proven a narrow stock market rally in 2023, led by just a handful of tech stocks leading the rest of the market, and whether there could be a medium-term correction if the breadth doesn’t improve.
“The big question is whether the breadth can continue to improve, which could breathe new life into what had been a very narrow rally,” Yung-Yu Ma, investment strategist at BMO, told CNBC.
“Recent developments in the banking sector are also encouraging, with repeated signs of labor market strength reducing downside risks. Monday’s PMI numbers and factory orders could help reinforce the positive narrative,” he added.
Meanwhile, after an intense month of first-quarter earnings, the documentation is far lighter in the week ahead. Investors will get a look at food prices and demand from JM Smucker, Campbell Soup and United Natural Foods. Stitch Fix, Signet Jewelers and DocuSign are also scheduled to report results.
In economic data, traders will get May PMI data from both the Institute for Supply Management and S&P Global on Monday, as well as April factory orders and durable goods. On Wednesday, the Norwegian Mortgage Association will release its latest data on mortgage applications.