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3 Reasons the Sleepy Action in Stocks is Set to End
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Market Overview
Tuesday, stocks once again traded in a sleepy manner. The day started with all the major indices higher, led by the Nasdaq 100 ETF ((QQQ - Free Report) ), which gained nearly 1%. However, as the day wore on, most of the major indices retraced back to even. Once again, the Russell 2000 Index ETF ((IWM - Free Report) ) underperformed, dropping by more than a half percent during the session.
Though big banks such as J.P Morgan ((JPM - Free Report) ) and Bank of America ((BAC - Free Report) ) are shining after reporting earnings, the regional banking side of the business is still a significant weight on the Russell 2000.
Image Source: Zacks Investment Research
The SPDR S&P Regional Bank ETF ((KRE - Free Report) ) lagged all session and finished lower by more than 2%. After the demise of Silicon Bank last month, KRE dropped 28% and has had difficulty “getting off the mat”. If KRE is to break lower once again, it would likely drag the IWM with it.
Image Source: Zacks Investment Research
Market Movers
Shares of online betting company and Zacks Rank #2 stock (Buy) DraftKings (DKNG) shot higher by more than 6% in heavy volume. DKNG, the leader in online betting, is gaining momentum as more and more states lift the ban on online sports betting. The breakout comes after the stock successfully tested support at its 50-day moving average earlier last week. Earnings are expected to be released in early May.
Image Source: Zacks Investment Research
Mobileye ((MBLY - Free Report) ) is a leader in the autonomous driving space. MBLY was spun off from Intel ((INTC - Free Report) ) and went public for a second time in October. Since then, shares have been on a tear and are up by more than 50%. MBLY is slated to report earnings next Thursday.
Image Source: Zacks Investment Research
Homebuilders such as Lennar ((LEN - Free Report) ) and DR Horton ((DHI - Free Report) ) are breaking out and are nearing new 52-week highs. Thus far, higher mortgage rates have had little effect on these stocks. Investors will get more color when DHI reports on Thursday.
What’s Next?
The choppy, back-and-forth price action Tuesday is reminiscent of the price action thus far in April. While this type of price action can be frustrating to traders in the short-term, it is likely to resolve in one direction or another by the end of the week for 3 reasons:
1. The Fed Meets Wednesday: As always, investors will look at the Fed’s rhetoric under a microscope.Any change to the “dovish” side can send stocks soaring and vice versa.
2. Jobless Claims are Due Thursday
3. Earnings Season is kicking off: Netflix ((NFLX - Free Report) ) kicks off earnings for big tech. Later in the week, Tesla ((TSLA - Free Report) ),Morgan Stanley ((MS - Free Report) ), and a plethora of other companies will report.
Beyond the three reasons mentioned above, the price action has been coiling for all of April. Volatility contractions into key events usually lead to volatility expansions (wider ranges). Be sure to know when your companies report earnings, and always mind your risk.
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3 Reasons the Sleepy Action in Stocks is Set to End
Market Overview
Tuesday, stocks once again traded in a sleepy manner. The day started with all the major indices higher, led by the Nasdaq 100 ETF ((QQQ - Free Report) ), which gained nearly 1%. However, as the day wore on, most of the major indices retraced back to even. Once again, the Russell 2000 Index ETF ((IWM - Free Report) ) underperformed, dropping by more than a half percent during the session.
Though big banks such as J.P Morgan ((JPM - Free Report) ) and Bank of America ((BAC - Free Report) ) are shining after reporting earnings, the regional banking side of the business is still a significant weight on the Russell 2000.
Image Source: Zacks Investment Research
The SPDR S&P Regional Bank ETF ((KRE - Free Report) ) lagged all session and finished lower by more than 2%. After the demise of Silicon Bank last month, KRE dropped 28% and has had difficulty “getting off the mat”. If KRE is to break lower once again, it would likely drag the IWM with it.
Image Source: Zacks Investment Research
Market Movers
Shares of online betting company and Zacks Rank #2 stock (Buy) DraftKings (DKNG) shot higher by more than 6% in heavy volume. DKNG, the leader in online betting, is gaining momentum as more and more states lift the ban on online sports betting. The breakout comes after the stock successfully tested support at its 50-day moving average earlier last week. Earnings are expected to be released in early May.
Image Source: Zacks Investment Research
Mobileye ((MBLY - Free Report) ) is a leader in the autonomous driving space. MBLY was spun off from Intel ((INTC - Free Report) ) and went public for a second time in October. Since then, shares have been on a tear and are up by more than 50%. MBLY is slated to report earnings next Thursday.
Image Source: Zacks Investment Research
Homebuilders such as Lennar ((LEN - Free Report) ) and DR Horton ((DHI - Free Report) ) are breaking out and are nearing new 52-week highs. Thus far, higher mortgage rates have had little effect on these stocks. Investors will get more color when DHI reports on Thursday.
What’s Next?
The choppy, back-and-forth price action Tuesday is reminiscent of the price action thus far in April. While this type of price action can be frustrating to traders in the short-term, it is likely to resolve in one direction or another by the end of the week for 3 reasons:
1. The Fed Meets Wednesday: As always, investors will look at the Fed’s rhetoric under a microscope.Any change to the “dovish” side can send stocks soaring and vice versa.
2. Jobless Claims are Due Thursday
3. Earnings Season is kicking off: Netflix ((NFLX - Free Report) ) kicks off earnings for big tech. Later in the week, Tesla ((TSLA - Free Report) ), Morgan Stanley ((MS - Free Report) ), and a plethora of other companies will report.
Beyond the three reasons mentioned above, the price action has been coiling for all of April. Volatility contractions into key events usually lead to volatility expansions (wider ranges). Be sure to know when your companies report earnings, and always mind your risk.