Tired of the S&P 500's go-nowhere mode? Careful what you wish for says Jonathan Krinsky at BTIG.
A new week is pointing to a perky start for Wall Street, with stock futures in the green. But one might wonder “What gives?” as old worries — banking sector concerns and a debt-ceiling standoff — lurk, and some market observers assure the S&P 500 SPX is going nowhere until those are resolved.
“We think we are reaching the end of the runway, where either banks need to begin to rally, or tech needs to fall. We continue to think it’s the latter and saw the start of that move on Friday,” Krinsky told clients in a note. The Nasdaq Composite COMP didn’t go careening south, but did see its first drop in three sessions, losing 0.3%.
There is another headwind for the S&P 500 this week that he and others are watching — May options expiries, with those for the VIX VIX set for Wednesday and S&P 500 options for Friday. In each of the last six years, and 11 of the last 14, Krinsky noted that the S&P has been negative during this week, with an average loss of 1.3%.
Once those options expirations are through this week, many of the related effects for the market will probably vanish, he expects, though volatility may rise ahead of an appearance by Fed Chair Jerome Powell on Friday. The Empire State manufacturing survey is due at 8:30 a.m. in a lighter week for data, with the exception of retail sales on Tuesday and housing starts on Wednesday.
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