Market Snapshot: U.S. stock futures retain Wall Street’s rally ahead of Powell testimony and jobs data

What’s driving markets

The S&P 500 recovered the 4,000 mark last week as investors welcomed the sight of benchmark bond yields pulling back below 4%, despite a report on Friday showing that the U.S. services sector remains in robust health.

“Last week ended the [S&P 500’s] string of three consecutive down weeks, and while the index’s net decline was much smaller than other recent three-week downturns, snapping the losing streak hasn’t necessarily resulted in an uninterrupted rally,” said Chris Larkin, managing director for trading at Morgan Stanley’s E-Trade.

“Traders are still anticipating a 25-basis-point hike in a few weeks, and investors should prepare for volatility if the jobs read surprises in either direction, especially as some Fed officials have indicated a 50-basis-point hike remains on the table,” Larkin wrote in emailed comments.

See: Why the February jobs report is unlikely to reverse a January blowout in this week’s key economic data release

The 10-year Treasury yield
TMUBMUSD10Y,
3.963%,
which hit 4.081% last Thursday before pulling back, declined to around 3.93%.

Bond Report: ‘Buckle up.’ Treasury yields hold steady as Powell testimony and jobs data loom

Investors’ attention will now turn to Powell’s semiannual congressional testimony on Tuesday and Wednesday, and then on Friday to the nonfarm payrolls report, which will show whether wage growth is being contained, an important consideration for the central bank.

Preview: Powell to talk to Congress about the possibility of more interest-rate hikes, not fewer

“[Powell] will certainly reiterate that the Fed is not yet done with its fight against inflation, that the labor market remains particularly strong, that a soft landing is possible, yet the Fed won’t hesitate to sacrifice growth to abate inflation as soon as possible,” said Ipek Ozkardeskaya, a senior analyst at Swissquote Bank.

“Looking at the latest set of data, the U-turn of easing inflation and last month’s blowout jobs figures, we don’t expect to hear anything less than hawkish from Mr. Powell. But it’s always possible that a word like ‘disinflation’ slips out of his mouth, and that we get a boost on risk,” she said.

Don’t miss: Stock market faces crucial test this week: 3 questions that could decide rally’s fate

Some analysts remained skeptical of the latest rally’s longevity.

“We think the countertrend rally can carry a bit further, but expect the 4060-4080 zone on [the S&P 500] to represent firm resistance based on retesting the broken uptrend, horizontal resistance from the mid-Feb. breakdown, and the falling 20-day moving average,” said Jonathan Krinsky, chief technical strategist at BTIG.

“Above that, the high-volume zone of 4125-4150 should act as more important resistance,” he added.

U.S. factory orders dropped 1.6% in January because of fewer contracts for large Boeing passenger planes. Most other manufacturers recorded somewhat higher bookings. Economists surveyed by The Wall Street Journal had forecast a 1.8% decline.

Companies in focus

• U.S.-listed shares of Alibaba Group Holding Ltd.
  BABA,
  +0.95%
  were up 1.4%, erasing an initial loss, while KraneShares CSI China Internet ETF
  KWEB,
  -1.44%
  declined 0.9%, after China’s official 5% growth target underwhelmed investors.

• Shares of Ciena Corp.
  CIEN,
  +4.65%
  jumped 5.2% after the optical-networking company’s earnings topped Wall Street estimates.

• Esperion Therapeutics Inc.
  ESPR,
  -20.66%
  dropped 20.4% after reporting data on a cholesterol drug for patients who can’t tolerate a statin.

• Shares of KB Home
  KBH,
  -1.68%
  fell 1.1% after JPMorgan downgraded the builder to underweight, while D.R. Horton Inc.
  DHI,
  -1.05%
  declined on a downgrade to neutral. The same broker upgraded Meritage Homes Corp.
  MTH,
  +1.08%
  to overweight, lifting the stock by 1.5%.

Movers & Shakers: China stocks slip after growth target released, as Ciena shares pop on earnings beat