A trader works on the trading floor at the New York Stock Exchange (NYSE) in New York, May 5, 2022.
Andrew Kelly | Reuters
Investors could get a reprieve in the week ahead from the vicious selling cycle that has gripped the stock market since late March.
Stocks bounced off of Thursday’s washout lows and were set to exit the week with reduced losses after Friday’s rally. Buyers on Friday hunted for bargains among small caps, biotechnology names, the Arkk Innovation ETF and other growth names that were hardest hit.
The S&P 500 was hovering near 4,000, after touching 3,858 on Thursday — near the 3,800 to 3,850 area that chart analysts have been targeting for a bottom. But while it seems like the market could bounce temporarily, market technicians say that zone will likely be tested again later on.
“Does that mean the lows of the year are in? Probably not, but it could create an oversold bounce back to retest the 4,100 or 4,200 level in the S&P 500,” said T3Live.com’s Scott Redler, who follows the market’s short-term technicals. “In bull markets, you get weeks when you pull in. In bear markets, you get oversold bounces.
Redler said he expects traders to try to sell the rally.
“It has the ingredients for an oversold bounce that might last more than a week. I think this bounce is going to be led by all the oversold names that are down 70% to 80% from their highs,” he said. “It doesn’t mean you can blindly buy. Not everything is going to be created equally in this bounce.”
Redler said the fact that the Federal Reserve does not meet for a few weeks could add some support to stocks. Markets have been nervous that the Fed will raise interest rates too quickly and choke the economic recovery as it tries to snuff out hot inflation.
In the week ahead, investors will continue to look for clues on the course of the central bank’s interest rate hiking path in both economic reports and comments from Fed officials.
Fed Chairman Jerome Powell is slated to speak at a Wall Street Journal conference Tuesday afternoon. For now, the market expects a half-point interest rate hike at the June meeting and another in July, with possibly a third in September. The central bank raised its fed funds target rate by a half point this month, after a quarter point hike in March.
The health of the consumer will be a major focus in the coming week. The economic calendar includes April retail sales and also a look at the housing sector, with the National Association of Home Builders’ survey; both reports are set …….