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Kevin Matras   
Profit from the Pros
By Kevin Matras
Executive Vice President
Zacks Investment Research

Stocks Down To Start The Week As The Market Tries To Build On Last Week's Rally From The Lows

Stocks closed mostly lower to start the week with only the Dow eking out a small gain.

But after last Thursday's and Friday's spectacular rebound and rally off the lows (the S&P was up 4.28% between the last 15 minutes of trading on Thursday and all of Friday), a little bit of a breather yesterday was warranted.

The jury is still out as to whether we saw the correction lows last week or not.

But the market was looking terribly oversold. And with the economy's strong underlying fundamentals, coupled with the market's 2-year low valuations, stocks look ripe for a meaningful bounce.

In addition to earnings, and inflation, the market will be watching the price of oil and gas (crude oil was up more 3% yesterday, and Natural Gas was up over 4%), and watching China as they get ready to slowly ease up on their Covid lockdown restrictions. By the end of June, Shanghai is expected to have exited their lockdown, which has lasted for more than 6 weeks so far.

Their shutdown not only weighed on China's economic activity, but also contributed to additional supply chain disruptions.

The markets will also be watching the war on Ukraine. Obviously, energy is impacted by this. But with Sweden and Finland set to apply for NATO membership (something Russia has warned against), people will also be watching to see Russia's reaction to this.

We'll get another look at the economy today with the Retail Sales report, Industrial Production, Business Inventories, and the Housing Market Index.

We'll also hear from Jerome Powell, as he speaks at the Future of Everything Festival in NY. While he's not expected to make any policy announcements, the market has been hanging on virtually every word he says given the Fed's tightening stance. The Fed has telegraphed their likelihood of a 50 basis point hike in June, and another 50 basis point hike in July. But Fed Fund traders are still speculating that the Fed may raise rates by 75 bps in June, in spite of Powell saying that wasn't under consideration. So there's still a degree of uncertainty over the Fed's next move, and why everybody listens so intently to what he says, as people try to discern any additional insight.

In the meantime, let's see if the market can try and build on last week's rally from the lows.

See you tomorrow,

Kevin Matras

Executive Vice President, Zacks Investment Research


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