US stock index futures continue to grow while investors ignore signs of a sharp economic slowdown. The fact that the Federal Reserve remains on track to tighten monetary policy makes the US dollar and bonds an attractive investment, but as we can see from the chart, it barely harms the stock market.
In the morning, the S&P 500 and Nasdaq 100 index futures each rose by 0.2% after fairly impressive gains on Monday. Meanwhile, the decline in crude oil prices seen yesterday is now over, even as economic headwinds continue to cash shadows over the outlook for demand and the prospects for increased supply.
According to the latest data, there has been a sharp decline in New York State manufacturing, the second worst performance since 2001, along with the longest streak of declining sentiment since 2007, leading to talk that the Fed may slow interest rate hikes as early as this fall. Fears of a US recession should not be ruled out either. While the Fed may still continue to tighten policy despite slowing inflation, market optimism is likely to continue to prevail.
Definitely, the lack of a clear direction may push the markets up and down, but the strengthening is about to begin.
Tomorrow, the minutes from the last Federal Open Market Committee meeting will be released. The Fed officials, including Esther George and Neel Kashkari, are expected to speak today. The big event that investors are waiting for is the annual monetary policy symposium at Jackson Hole, Wyoming, August 25-27. Until then, it is unlikely that anything major will happen to the balance of power.
Nevertheless, the risk that markets will fall below their June lows this fall is quite high. As soon as US statistics begin to show a slowdown amid the developing recession, the stock market is likely to begin to fall sharply.
PremarketHome Depot shares are trading flat after the company reported quarterly earnings of $5.05 per share, $0.11 above estimates, with revenue and comparable store sales also beating the estimates.
Walmart stock was up by 3.4% in the premarket after reporting better-than-expected second-quarter revenue and earnings results. Store sales also beat estimates, and Walmart expects earnings to fall slightly less this year than previously estimated.
Philips shares soared by 2.6% after the Dutch healthcare technology company announced that CEO Frans van Houten will leave the post on October 15. He will be replaced by Roy Jacobs, who currently heads the Connected Care division.
Shares of mining company BHP jumped by 3% in the premarket after it reported its highest annual profit in 11 years. BHP's results were impacted by higher coal prices.
S&P 500 technical picture
The index continues to hit new highs and it seems it is unlikely to stop doing this. If the trading instrument declines, bulls will have to try hard to hold the price above the support of $4,665. This would strengthen the uptrend and form the lower boundary of the uptrend channel. The index may grow only after fixing above the new resistance of $4,319. Once it is done, the asset may dash to the area of $4,376, where large sellers are likely to come back to the market. At least, there will be those, who wish to lock in profits on long positions. The next target is located at the level of $4,433. If we see weak corporate reports and weak US statistics, only a breakthrough of $4,265 may open the way to $4,234, where bulls may become more active again. If bears push the index down to $4,184, which is the lower boundary of the uptrend channel that we have had since July 14 this year, nothing really crucial will happen to the price. If that level is broken through, the index may be pushed back to $4,150 and $4,116.
