Dow 30: Futures up slightly after a week of limited gains

Worrying data persists, yields remain high, but earnings from big tech impress

There was quite a bit to digest from the US towards the end of last week, with stagflationary concerns on the rise. This came in light of the advance GDP (Gross Domestic Product) for the first quarter of this year, which notably fell short at just 1.6%, while the pricing data generally came in hotter than expected. The PCE (Personal Consumption Expenditures) price index for March exceeded forecasts, with its year-on-year (y/y) readings escalating to 2.7% headline and remaining at 2.8% core. Its month-on-month (m/m) statistics came in as anticipated at 0.3% for both, with the Cleveland Fed's 'nowcasts' for April at 2.7%, 2.74%, and 0.29% m/m headline, alongside 0.23% core.

Personal income for the same month saw an increase of 0.5%, while spending, considered larger and unsustainable, was up by 0.8%. Moreover, the revised figures from the UoM (University of Michigan) showed consumer sentiment continuing in the 77 range, while inflation expectations ticked up slightly for the 12-month period to 3.2%. Earnings from big tech towards the end of the week managed to provide some relief, helping the tech-heavy Nasdaq 100 to outperform. However, whether this positive momentum can be sustained remains to be seen, as Treasury yields stay high—even after a slight pause last week—and recent data has been anything but reassuring.

Week ahead: FOMC, NFP, PMIs, and more earnings

As for the week ahead, it's a significant one on multiple fronts in the US. We have the FOMC (Federal Open Market Committee) policy announcement scheduled for Wednesday, followed by Chairman Powell's press conference. Market conditions, monitored by CME's FedWatch, are currently in a hold state concerning rates, but fluctuations are expected regarding market predictions of when the first (and possibly only) rate cut might occur this year.

Regarding economic data, there is much to review, including the PMIs (Purchasing Managers' Index) for the manufacturing sector on Wednesday and for services on Friday. Both sectors have shown signs of expansion recently, although the former may struggle to remain above the 50 mark. Additionally, there are other important metrics to consider, including housing price data and consumer confidence. However, much attention is focused on the US labor market, with the employment cost index for the first quarter due for release tomorrow.

Furthermore, ADP’s non-farm estimate and job openings will be announced on Wednesday, Challenger’s job cuts and the weekly claims on Thursday, culminating in the potentially market-impacting Non-Farm Payrolls (NFP) on Friday. Expectations are for a growth of over 200K for April, with ongoing 0.3% month-on-month growth in wages and the unemployment rate expected to stabilise at 3.8%. On the earnings front, both Amazon and AMD are set to report on Tuesday, followed by Apple on Thursday.

Dow technical analysis, overview, strategies, and levels

The technical overview on the weekly time frame has managed to hold as ‘bull average’ but most of its main technical indicators are neutral where they aren’t mixed, with price still above all its main long-term moving averages while beneath all its main short-term ones. It’s the daily time frame where the struggle has been more apparent, and barring major fundamental events is a cautious consolidatory one.

IG client* and CoT** sentiment for the Dow

CoT have been unwinding their long bias and are no longer in heavy buy territory, taking it from 70% to 61% (longs -4,439 lots, shorts +2,388). We'll have to wait until this Friday's report to see if they're opting to get back in after last week's contained gains. IG clients are little changed for the week due to the relatively small change in price here compared to, say, the US Tech 100.

Dow chart with retail and institutional sentiment

• ^{*The percentage of IG client accounts with positions in this market that are currently long or short. Calculated to the nearest 1%, as of the start of this week for the outer circle. Inner circle is from the start of last week.}
• ^{**CoT sentiment taken from the CFTC’s Commitment of Traders report, outer circle is latest report released on Friday with the positions as of last Tuesday, inner circle from the report prior}