S&P 500 and Nasdaq Futures plunge on Monday: Analyst sees profit taking bring ‘buying opportunity’ as traders watch Fed’s Jackson Hole event

Wall Street looks set to start the first trading session of the week on a sharply negative note, extending Friday’s bearish momentum.

Major US averages ended the week ended Aug. 19 on a low note, with the S&P 500 index posting a four-week winning streak and ending down 1.2% for the week at 4,228.48. “Despite the recent surge in the overall stock market, the S&P 500 was unable to close above its 200-day moving average. As a result, the market is currently going through a digestion phase, triggered by economic reports weaker than expected and anxiety ahead of statements and policy indications that are expected to emerge from the Jackson Hole economic symposium,” Sam Stovall, chief investment strategist at CFRA Research told Benzinga.

Last week’s selloff was led by tech stocks, reflected in the Nasdaq Composite Index’s 2.7% weekly drop. The 30-stock Dow Industrials saw a more modest decline of 0.16%.

Much of the market’s weakness was charged over the past week, with stocks particularly punished on Friday amid a massive options expiration.

The correction looks more technical in nature as the six-week rally has stalled, Navellier Associates’ Louis Navellier said in a note. The fund manager also pinpointed the predicament on the expiration of the $2 trillion options.

At press time Monday, Dow and S&P futures were down 0.82% and 1.05%, respectively. Nasdaq 100 futures plunged 1.37%.

The fundamentals remain largely the same, Navellier said.

“Profit taking after a major rally is to be expected and presents a buying opportunity in high earners that are being dragged into the correction,” the market expert said.

Economically, investors could digest the results of a business activity survey. The Chicago Federal Reserve is set to release its national activity index for July at 8:30 a.m. ET. In June, the index was at -0.19, suggesting a contraction in activity.

Caution should be the watchword the week before the annual central bankers meeting in Jackson Hole on Thursday and Friday.

Navellier noted that fears around the theme of global tightening were building at the Fed’s informal event, weakening expectations of a pivot to lower rates next year.

As the second quarter reporting season enters its final stage, earnings will decline this week. Among the notable earnings predicted for the week are two tech names – Palo Alto Networks, Inc. PANW and Zoom Video Communications, Inc. ZM. Both are due to release their quarterly reports after the market closes.

WTI crude oil futures rallied in New York trading and are back above the market at $90 a barrel, which could push energy inventories higher.

Among the individual actions, AMC Entertainment Holdings CMA drops sharply after the company paid its shareholders one preferred stock unit for every share they held. The preferred unit will begin trading on the NYSE under the symbol APE.

Signify Health, Inc. SGFY jumps on M&A rumors.

Major Asian markets fell on Monday, although markets in China, Singapore and New Zealand bucked the downtrend. China received support from the People’s Bank of China’s decision to cut policy rates again. A week after an unexpected drop, the central bank cut the five-year prime lending rate from 4.45% to 4.30% and the one-year prime lending rate from 3.70% to 3.65%.

European equities are also expected to dip, in line with the general negative market sentiment seen around the world.

In premarket exchanges on Monday, the SPDR S&P 500 ETF Trust TO SPY slipped 1.11% to $417.45 and the Invesco QQQ Trust QQQ was down 1.95% at $322.86, according to data from Benzinga Pro.

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