Weekly Trader's Outlook

If you read last week's blog you might recall that my friend and colleague Joe Mazzola's primary forecast for this week was "Slightly Bearish," citing concerns around the technicals and weakening consumer confidence. Joe turned out to be right as the S&P 500 is on track to be down over 1.0% on the week at the time of this writing. Additionally, the recent deterioration in consumer sentiment echoed in this week's Consumer Confidence and University of Michigan Consumer Sentiment reports (more on this in the "Economic Data, Rates & the Fed" section below). Other factors contributing to this week's bearish price action include a new 25% tariff from the Trump administration on all autos imported into the U.S. and a poorly received IPO from NVDA-backed AI darling Coreweave (CRWV opened for trading today at $40, below its earlier midpoint estimate of $51). Lastly, after closing back above the 200-day SMA on Monday, the SPX reversed course and appears to be on track to re-test the March 13th lows (more on this in the "Technical Take" section below). All in all, it was a bearish week for stocks as concerns around the impact of tariffs, both in terms of inflation and growth, the state of the U.S. consumer, along with relatively elevated stock valuations, continued to dampen investor sentiment.

At the time of this writing (2:45 p.m. ET), all the major indices are near the lows of the session (DJI - 756, SPX - 117, COMP - 491, RUT - 50), as investors appear to be reluctant to take a bullish stance ahead of the upcoming April 2nd tariff escalation deadline. Next Friday we will also have the monthly Nonfarm Payrolls report to look forward to, so higher volatility is in the cards. Any upcoming "hard data" economic reports will be subject to higher sensitivity from markets given the recent concerns around growth. We also have some key near-term technical levels to keep an eye on next week as the SPX, NDX and RUT are approaching the March 13th lows (SPX 5,504, NDX 19,225, RUT 2,000). Should the indices fall below these levels this could foster additional selling pressure. From a bullish perspective, the passing of the April 2nd deadline, regardless of what is announced, could generate a "buy the news" relief rally. However, it's unclear how long such a rally can be sustained given the heightened uncertainty and deterioration in the data. Therefore, my primary forecast for next week is "Volatile," with an overall secondary reading of "Slightly Bearish." Given today's near-2.0% sell-off across the board, I would suspect we see a counter trend (bullish) bounce at some point next week, but I'm just not sure how sustainable it will be. What could challenge my outlook? If the March 13th lows hold (meaning we don't get a close below the closing lows on this date) next week, this could help improve investor sentiment and bring in some technical buying. Also, if Trump's reciprocal tariffs turn out to be tepid or are postponed, this could also provide enough of an excuse to bring in some dip buyers.

Other Potential Market-Moving Catalysts:

Economic:

• Monday (3/31): Chicago PMI
• Tuesday (4/1): Construction Spending, ISM Manufacturing Index
• Wednesday (4/2): ADP Employment Change, EIA Crude Oil Inventories, Factory Orders, MBA Mortgage Applications Index
• Thursday (4/3): Continuing Claims, EIA Natural Gas Inventories, Initial Claims, ISM Services, Trade Balance
• Friday (4/4): Nonfarm Payrolls, Average Workweek, Average Hourly Earnings, Unemployment Rate

Earnings:

• Monday (3/31): Loar Holdings (LOAR), PVH Corp. (PVH)
• Tuesday (4/1): nCino Inc. (NCNO)
• Wednesday (4/2): UniFirst Corp. (UNF), RH Inc. (RH), Blackberry Ltd. (BB)
• Thursday (4/3): Conagra Brands Inc. (CAG), Acuity Brands (AYI), Lamb Weston Holdings Inc. (LW), Lindsay Corp. (LNN), Guess? Inc. (GES)
• Friday (4/4): no reports

Markets received a moderate dose of economic data this week, which included the Federal Reserve's preferred inflation gauge—the personal consumption expenditures (PCE) price index. Unfortunately for the bulls, core PCE prices came in a little warmer than expected while Personal Spending came in a little softer than expected, suggesting that higher prices are impacting consumer behavior. Additionally, we received continued negative sentiment (soft) data around future inflation expectations. Certainly, the aggressive trade policy that the Trump administration has undertaken is impacting the consumer perspective. On a bullish note, weekly Initial Claims continued to hover in the 220-230K zone so the job market spears to be holding up relatively well. Here's the breakdown from this week's reports:

• Consumer Confidence: Declined 7.2 points from the prior month to a four-year low of 92.9 (economists surveyed by Dow Jones had expected 93.5). The survey's measure of future expectations dropped 9.6 points to 65.2, representing a 12-year low.
• PCE Prices: Were in line with estimates on both a month-over-month (MoM) basis (+0.3% vs. +0.3% est.) and a year-over-year (YoY) basis (+2.5% vs. +2.5%).
• Core PCE Prices: Increased 0.4% MoM (above the +0.3% expected) and +2.8% YoY (above the +2.7% expected and higher than the +2.6% reading in the prior month).
• Personal Income: +0.8% (above the +0.4% expected)
• Personal Spending: +0.4% (below the +0.5% expected) following a 0.2% decline in the prior month.
• S&P Global US Manufacturing PMI: Fell 2.9 points to a three-month low of 49.8.
• S&P Global US Services PMI: Increased 3.3 points to a three-month high of 54.3.
• Durable Goods: Increased 0.9% month-over-month to $289.3B versus expectations for a 1.0% decline. Core Durable Goods increased 0.7% from 0.0% in the prior month and above the +0.2% expected.
• Q4 GDP (Third Estimate): The final estimate for Q4 GDP was revised 0.1% higher to 2.4%. For reference, this represents a deceleration from the +3.1% pace in Q3.
  Pending Home Sales: Increased 2.0% in February which was above the +1.5% expected but 3.6% lower on a year-over-year basis.
• Initial Jobless Claims: Decreased to 224K from 225K in the prior week, and below the 227K economists had expected. Continuing Claims decreased 25K to 1.856M from last week, and below the 1.888M economists had expected.
• University of Michigan Consumer Sentiment (Final): The final reading on consumer sentiment fell to a 32-month low of 57.0 (below the 57.9 expected) in March. Within the report, consumer's one-year inflation expectation rose to 5.0%, up 0.1% from the mid-month reading and +0.7% higher than the prior month. The five-year inflation expectation rose to 4.1% from the 3.9% mid-month reading and representing the highest reading since February 1993.
• The Atlanta Fed's GDPNow "nowcast" for Q1 GDP was revised down to -2.8% this morning from -1.8% on March 26th.

The two/10 yield curve in U.S. Treasuries experienced some steepening this week as markets digest the impact of tariffs, potential inflation and longer-term growth implications. Compared to last Friday, two-year Treasury yields are ~3 basis points lower (3.926% vs. 3.954%) while 10-year yields are ~2 basis points higher (4.274% vs. 4.252%).

Expectations around potential rate cuts from the Fed didn't see much movement this week versus last, despite this morning's warmer-than-expected inflation data. Per Bloomberg, markets are expecting a 25-basis-point rate cut either at the June Federal Open Market Committee (FOMC) meeting (currently 81% vs. 83% last week) or July FOMC meeting (theoretically 100%). The next FOMC takes place on May 6th-7th.

The techincals on the S&P 500 (SPX) took a bearish turn this week. After managing a solid close above the 200-day Simple Moving Average (SMA) on Monday, the SPX reversed course and has moved lower all week which suggests this moving average is considered a key near-term resistance level. In technical terms, the rejection at the 200-day SMA is called a "pullback" from the preceding downtrend. Additionally, today's large red candle looks like a potential confirmation of a bear flag formation, though some technicians consider a breach of the low price from the pattern (i.e. 5,504) the bearish confirmation signal. Regardless, it appears the index is setting up for a re-test of the March 13th low (5,504), which was also the day the index hit its technical -10% correction from recent highs

Near-term technical translation: bearish

Similar to the SPX, the Nasdaq 100 (NDX) ran into resistance at the 200-day SMA this week and appears to be set up for a re-test of the March 13th closing low at 19,225, either later today or early next week. In my view this creates a near-term technical binary outcome for the NDX–if support can hold up at the March 13th lows (meaning the index does not register a close below this level), this could shift near-term sentiment in favor of the bulls and bring in the dip buyers. However, if the index continues to drop and takes out 19,225, the next potential support level I've got on my chart is around 18,420 (last September's closing low), followed by 17,435 (last August's low from the unwind of the "Yen-carry trade").  

Near-term technical translation: slightly bullish if 19,225 holds, otherwise bearish

Last week a few new futures-based Solana ETPs launched, which provide investors with a product that will provide exposure to the price fluctuations of the cryptocurrency Solana. The Solana blockchain is designed to offer high throughput (higher transaction load) and lower transaction fees versus other blockchains. This week there were a couple of filings from the Cboe and Fidelity for a spot-based Solana ETP, which is yet to be approved. The launch of Solana ETPs follows the recent approval of both futures and spot-based Bitcoin and Ether ETPs launched over the past 15 months. However, there can be significant differences, both in terms of performance and fees, in futures-based and spot-based ETPs, so be sure to conduct your due diligence before considering any investment in this space.

The Bloomberg chart below shows the current percentage of members within the S&P 500 (SPX), Nasdaq Composite (CCMP) and Russell 2000 (RTY) that are trading above their respective 200-day Simple Moving Averages (SMA). Stocks are on track for modest losses this week but market breadth (as measured by the 200-day SMA threshold) was little changed. On a week-over-week basis, the SPX (white line) breadth improved to 47.20% from 45.00%, the CCMP (blue line) ticked down to 32.88% from 33.32%, and the the RTY (red line) is essentially unchanged at 33.28% versus 33.58%.

Market breadth attempts to capture individual stock participation within an overall index, which can help convey underlying strength or weakness of a move or trend. Typically, broader participation suggests healthy investor sentiment and supportive technicals. There are many data points to help convey market breadth, such as advancing vs. declining issues, percentage of stocks within an index that are above or below a longer-term moving average or new highs vs. new lows.

This Week's Notable 52-week Highs (47 today): American International Group Inc. (AIG + $0.08 to $84.50), Berkshire Hathaway – Class B (BRK/B - $0.45 to $534.07), Chevron Corp. (CVX + $0.07 to $166.72), Loew's Corp. (L + $0.42 to $91.82), O'Reilly Automotive Inc. (ORLY - $4.80 to $1,418.82)

This Week's Notable 52-week Lows (232 today): BioRad Laboratories Inc. (BIO - $1.67 to $245.49), Diageo PLC (DEO + $0.41 to $105.93), Dow Inc. (DOW - $0.30 to $34.94), Jack In The Box Inc. (JACK - $0.28 to $28.29), Novo Nordisk A/S (NVO - $0.32 to $69.84), Regeneron Pharmaceuticals Inc. (REGN - $2.28 to $633.55)