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If you had taken a bearish stance ahead of yesterday’s open based on pre-market broad equity futures, you would have been right, up until about 1:00 pm. In fact, while markets opened lower, they essentially spent the bulk of the day grinding higher. UnitedHealth Group (UNH) had a strong 8%+ day, contributing to just under 40% of the S&P 500 index’s 0.09% gain and about 100% of the Dow’s 0.32% rise. Mag 7 names took supporting cast roles yesterday, showing up in only 3 slots of the top ten contributors to return for holdings of the SPDR S&P 500 ETF Trust (SPY). The advance decline line for those names was 258/245, and the Dow 14/16, so overall, a mixed day. The Nasdaq Composite eked out a 0.09% gain, and small caps lost ground as the Russell 2000 closed 0.42% lower.

Sectors were largely positive, although Technology and Consumer Discretionary slipped 0.14% and 0.23%, respectively, dragged lower by Mag 7 constituents Apple (AAPL) and Tesla (TSLA). Energy led the way lower, dropping 1.30% as demand forecasts eased. The remaining sectors saw gains ranging from 0.06% (Financials) to 0.96% (Healthcare, courtesy of UnitedHealth Group). Despite Friday’s US debt downgrade, Gold held steady, picking up about $18 to close at $3.222.30/oz, and while some are calling for the 10-year yield to climb to 5% by year’s end, that benchmark only picked up 1 basis point (0.01%) to 4.45%.

The Tematica Select Model Suite experienced a mixed day with leadership Coming from Cybersecurity and Safety & Security as well as Cash Strapped Consumer. Laggards included EV Transition and Homebuilding & Materials. With a number of retailers reporting this week, we’ll be keeping an eye on Core Holdings, Guilty Pleasure, and Luxury Buying Boom as well as Digital Lifestyle and of course, Digital Payments.
 

Home Depot & Homebuilding Earnings, May Flash PMI Coming Soon

Dip buyers returned yesterday to drive another positive day in US equity markets, extending the S&P 500’s winning streak to six consecutive days. That move also landed the S&P 500’s relative strength index (RSI) at 69.97, knocking on the door of being overbought. With an empty slate of economic data for today, the known catalyst is quarterly results from Home Depot (HD) and, to a lesser extent building products company Eagle Materials (EXP) and homebuilder Hovnanian (HOV). Because spring is a seasonally strong season for Home Depot and homebuilders, those results will be a closely watched barometer for consumer spending.

Comments about tariffs, margins, and pricing from Home Depot will be in focus, while pricing, the use of incentives and margins will be focal points inside Hovnanian’s results. Because Home Depot sources products from Mexico, Canada, China, India and other countries, its comments about tariffs should be insightful, and we suspect it is likely to reiterate Walmart’s (WMT) comments about pending price increases. Insights from Hovnanian should shape expectations for quarterly results from Toll Brothers (TOL) after today’s market close, while those from Eagle Materials should do the same for James Hardie’s (JHX). We’ll be drinking in those comments and revisiting not only our Cash-Strapped Consumer model, but also Homebuilding & Materials as well.

We also have another round of Fed speakers today which given a lack of fresh data, are likely to reiterate the slow your rate cut expectations roll comments yesterday from Atlanta Fed President Raphael Bostic and New York Fed chief John Williams. Both telegraphed investors should not expect a rate cut from the central bank until at least September. Williams summed it up rather well and put a new spin on Fed Chair Powell’s “data dependent” line when he said, “It’s going to be a process of collecting data, getting a better picture, and watching things as they develop.”

That reaffirms our view that upcoming data and how it re-shapes inflation and GDP expectations will be closely watched. With only a few pieces of April economic data left, we are seeing various rolling Fed member bank rolling GDP forecasts coalesce around a 2.3% - 2.4% figure for the current quarter. Such figures suggest the US economy is not being overly impacted by tariffs, and needs saving by the Fed. However, we do have a longer data road ahead to the Fed’s next set of updated economic projections it will share alongside its June policy meeting. We continue to think those projections could be a headwind for a market that continues to see the Fed delivering three rate cuts this year. That concern has us eagerly awaiting the May Flash PMI report that will be published later this week.

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