Stock futures are little changed after the S&P 500’s best week since March

U.S. equity futures were mixed on Monday morning after a broad-based rally last week that pushed the S&P 500 to its best week since March, and its highest level since last August.

Futures tied to the Dow Jones Industrial Average added 29 points, or 0.09%. S&P 500 futures were 0.07% lower and Nasdaq-100 futures dipped 0.3%.

Oil prices briefly climbed more than 2% after Saudi Arabia announced it would further cut output by 1 million barrels per day starting in July. The news followed a meeting of OPEC and its allies, during which the group decided to stick to existing 2023 production targets. The jump in crude prices faded Sunday evening, with both Brent and U.S. West Texas Intermediate futures last trading about 1% higher.

On Friday, stocks rallied to end the week following strong jobs data for the month of May. The Dow jumped 701.19 points, or 2.12%, for its best day since January, ending the week at 33,762.76. The S&P 500 rose 1.45% to 4,282.37, while the Nasdaq Composite climbed 1.07% to 13,240.77 and posted its sixth straight weekly advance.

Over the weekend, President Joe Biden signed the debt ceiling bill into law, averting a potentially catastrophic default by the U.S. government.

Investor sentiment was high Friday following the blowout nonfarm payrolls growth in May reported by the Labor Department. Public and private sector payrolls increased by 339,000 in May, compared to the Dow Jones estimate of 190,000, average hourly earnings rose at an annual rate of 4.3%, a bit less than economists expected, and the average work week fell a fraction. The report eased concerns about an impending recession.

“Despite the rising number of leading indicators that indicate a recession coming soon, continued strength in the labor market and stubborn levels of personal consumption are pushing the onset further down the road,” said Mace McCain, chief investment officer at Frost Investment Advisors.

“We don’t think the economy can tip into recession until employment weakens materially,” he added. “The unemployment rate has spiked with every decline in job openings going back to the 1950’s but [has] yet to happen this cycle. This trend could continue, hence delaying the recession.”

More than that, investors are focused on what has so far proven a narrow stock market rally in 2023, led by just a handful of tech stocks that have been carrying the rest of the market, and whether there could be an intermediate-term correction if breadth doesn’t improve.

“The big question is whether breadth can continue to improve, which could breathe new life into what had been a very narrow rally,” Yung-Yu Ma, chief investment strategist at BMO, told CNBC.

“Recent banking sector developments are also encouraging, and repeated signs of labor market strength are reducing the risk negative outcomes. Monday service PMI numbers and factory orders could help reinforce the positive narrative,” he added.

Meanwhile, after an intense month of first quarter earnings, the docket is far lighter in the week ahead. Investors will get a look into food pricing and demand from J.M. Smucker, Campbell Soup and United Natural Foods. Stitch Fix, Signet Jewelers and DocuSign are also scheduled to report results.

In economic data, traders will get PMI data for May from both the Institute for Supply Management and S&P Global on Monday, as well as April factory orders and durable goods. On Wednesday, the Mortgage Bankers Association will release its latest data on home loan applications.