S&P500: US Indices Drop as Oil Rebound Shakes Stock Market Forecast

Iran Spikes Oil, Stocks Drop

The S&P 500 Index slipped 0.2% Thursday. The Nasdaq Composite fell 0.3%. The Dow Jones Industrial Average held near flat. West Texas Intermediate crude oil ripped roughly 3% to around $102 a barrel after Iran’s supreme leader directed enriched uranium to stay inside the country. Spot Brent crude oil added 3% to about $108. The 10-Year U.S. Treasury yield climbed four basis points to 4.615% and the 30-year hit 5.14%. Wednesday’s rebound is already gone and the same two pressures that broke the market earlier this week are right back on the screen.

Iran Spikes Oil Again

Oil did the damage Thursday. Iran’s supreme leader told the country to keep enriched uranium inside its borders and that killed whatever Iran deal optimism was still on the screen. West Texas Intermediate crude oil climbed roughly 3% to around $102 a barrel. Spot Brent crude oil added a similar 3% to about $108. Higher oil pushes the inflation worry right back to the front of the line. The 10-Year U.S. Treasury yield jumped four basis points to 4.615% and the 30-year hit 5.14%. Higher yields make borrowing more expensive and pull money out of stocks into bonds. That is the chain that broke Wednesday’s bounce.

Nvidia Beats. Market Yawns.

Nvidia delivered the quarter and the stock barely moved. Revenue jumped 85% year over year to $81.62 billion against an estimate of $78.86 billion. The company also raised the quarterly cash dividend to 25 cents per share. Shares stayed pinned near flat for the session. That tells you where expectations are right now. When a company puts up 85% revenue growth and the stock cannot find a bid, the question is no longer whether Nvidia is growing. It is whether Nvidia is growing fast enough to justify where it is already priced. That is the expectations problem and it does not get easier from here.

SpaceX Cuts In Retail

SpaceX is opening part of its public offering directly to retail through Robinhood, Fidelity, and Charles Schwab. Individual buyers get the same price and the same timing as institutional buyers. That is a real shift in how large IPOs get distributed and it puts retail in a seat that has historically gone to the big money.

Quantum Names Catch Fire

Quantum computing stocks ran hard Thursday on reports that Washington plans to hand out roughly $2 billion in grants to nine companies in the sector and take equity stakes as part of the agreements. IBM looks like the biggest winner with roughly $1 billion potentially coming its way and the stock jumped more than 6%. Rigetti Computing, D-Wave Quantum, Quantum Computing, IonQ, and GlobalFoundries all posted double-digit gains or strong advances. This is not just one government check. It is Washington taking equity in a sector traders have been trying to figure out how to value for two years.

Factory Data Falls Off Cliff

The factory data fell apart Thursday. The Philadelphia Federal Reserve manufacturing index dropped to negative 0.4 in May from 26.7 in April. That is a brutal miss and not the kind of move you can blame on one-off factors. Initial jobless claims came in at 209,000, slightly below forecasts, which says the labor market is still holding together. Housing data beat on building permits and housing starts even with some monthly declines. The factory print is the one to focus on. When manufacturing falls apart that fast it usually shows up in earnings two quarters later.

Earnings Movers Pile Up

 

Walmart fell after weaker than expected guidance. Intuit dropped sharply on a

workforce reduction announcement and softer revenue. E.l.f. Beauty climbed on stronger earnings and commentary on easing price pressure for consumers. Nio gained on better than expected results and stronger delivery guidance. Deere beat estimates and still went lower. Same problem showing up in industrials when expectations get this stretched.

S&P 500 Index (SPX) Technical Analysis

The S&P 500 Index (SPX) is in an uptrend, but also testing a critical area that should determine whether the rally continues or begins to fade away.

The short-term range is 7517.12 to 7333.68. The critical area to watch today is its retracement zone at 7425.40 to 7447.05. Trader reaction to this zone will set the tone today.

A sustained move over 7447.05 will indicate the presence of buyers. This would put the record high at 7517.12 back on the radar.

A sustained move under 7425.40 will signal the presence of sellers. This could lead to a test of the minor bottom at 7333.68 and the series of pivot price support levels at 7345.62, 7312.49 and 7281.84. But more importantly, it will form a secondary lower top at 7435.69, which is a potentially bearish chart formation.

For those looking for a potential trigger point for an acceleration to the downside, watch the price action at 7281.84.

Today, the focus should be on trader reaction to 7425.40 to 7447.05. This should tell us a lot about the strength of the market.

What To Watch

Three things are live going into today’s close. Iran is the first one and the uranium headline killed whatever deal optimism was left in the market. Oil at $102 keeps the inflation story alive and that keeps the Fed on hold. Yields are the second one and the 10-year above 4.6% is where stocks start to feel real pressure. Nvidia is the third and the muted reaction to a great quarter says expectations across the AI trade are stretched. Those three together produce a market that fades every rally until one of them resolves.

The chart says where the trade breaks. The S&P 500 Index is sitting right on the 7425.40 to 7447.05 retracement zone and trader reaction to that area sets the tone today. A break under 7425.40 puts the secondary lower top at 7435.69 in play and that is a bearish chart formation. The level I am watching is 7281.84. That is where the downside accelerates if sellers take control.

More Information in our Economic Calendar.