S&P500 and Nasdaq Index: Tech Bounce or Trap Today as Walmart Weakness Hits Market Mood

Stock Futures Lower as Walmart’s Weak Guidance Exposes Market Fragility

The major stock index futures contracts are lower in premarket trading on Thursday after Walmart’s full-year earnings outlook fell short of expectations, weighing on investor sentiment ahead of the cash market opening.

The company’s earnings report was better-than-expected for the fourth quarter, but the guidance rattled investors enough to drive the stock 5% lower. The move highlights just how fragile the market is at this time with investors putting less importance on the past and more weight on the future.

This dramatic shift in thinking began with the tech sector stocks in January and now appears to have shifted to the retail sector.

Iran-U.S. Tensions Boost Oil, Could Help Energy Stocks Today

Also keeping investors on edge is the turmoil in the Middle East between Iran and the United States, although it is expected to be supportive for oil prices, which could help energy sector stocks today. West Texas Intermediate (WTI) crude oil is up 1% on Thursday after posting a 4% gain the previous session. The S&P Energy Sector rose 2% on Wednesday. Chevron Corp., a key component of the sector, rose 1.84%.

Is This Week’s Tech Rally Real or Just a Technical Bounce?

We could find out today if the rally in the technology sector, led by the “Magnificent Seven,” this week is real and not just a technical bounce. There are still some concerns about disruption risk in the software sub-sector that may be irrecoverable in the short-run if investors continue to favor a rotation into “old economy”, more cyclical stocks. The financial sector faces similar risks.

Jobs Data Strong, Now All Eyes on Friday’s PCE Inflation Report

In economic news, weekly initial claimsfell and came in under the forecast. This lines up well with the recent strength in the labor market shown by the January Non-Farm Payrolls report. The focus now shifts to inflation and Friday’s PCE index report. On Wednesday, the Fed minutes yielded no clarity for investors with Fed members still uncertain about how to handle sticky inflation. Perhaps the PCE data will help. Right now the odds of a June rate cut are about 50.4%.

The Technical Picture: Bearish Below 50-Day Moving Average at 6933

Technically, my outlook for the March E-mini S&P 500 Index is bearish as long as the futures contract remains under the 50-day moving average at 6933.00.

If buyers can overtake the 50-day moving average, momentum will shift to the upside and investors will get a clean shot at recent tops at 7006.50, 7027.25 and the record high at 7043.00.

Downside momentum will build the longer the futures contract remains on the weak side of the 50-day moving average. The index is open to the downside with a retracement zone at 6813.00 to 6758.75 the primary target. Taking out the February 6 bottom at 6751.50 could trigger an acceleration to the downside with the next major target the 200-day moving average at 6628.50.

February Can’t Break Even Unless 50-Day MA Falls

As we near the last week of trading for February, the index is lower for the month and it can’t get back to even at 6965.75 unless it blasts through the 50-day moving average.

More Information in our Economic Calendar.