S&P 500 futures declined by 1.7% to 5,931
points on Monday, recovering slightly from the opening low of 5,908 points. The
index reached its lowest level since January 15 in response to the U.S.
government's introduction of new tariffs. President Donald Trump followed
through on his promise, imposing a 25% tariff on Canadian and Mexican imports,
with oil imports subject to a 10% tariff. Additionally, a 10% tariff was placed
on Chinese exports to the U.S. Investors had hoped Trump would avoid reigniting
trade wars, with Bloomberg previously reporting that the tariff implementation
was delayed until March 1. This temporarily lifted the S&P 500 by 0.8% to
6,119 points, but official denials sent the benchmark down to 6,029 points on
Friday. Markets now await retaliatory actions, with Canada already imposing 25%
tariffs on $30 billion of U.S. exports and planning additional tariffs on $135
billion in the coming weeks. Mexico is also preparing its response, while China
has filed a lawsuit with the World Trade Organization and is working on
countermeasures.
Trump’s trade policies may be a strategic move
to push negotiations, but if not, the world could be entering a second, more
damaging trade war—this time involving not just China but multiple U.S. trade
partners. His actions appear aimed at reinforcing American economic dominance
by effectively introducing a global trade tax. The S&P 500 initially showed
an upward shift in formation last Friday, but the confirmation of tariffs
reversed this trajectory. The index is now hovering at its key support level of
5,920–5,940 points, the last barrier before a potential sharp decline toward
5,650–5,750 points.
The tariff situation is the primary factor
preventing the index from resuming an upward move. FactSet reports that 77% of
the 30% of S&P 500 companies that have reported Q4 2024 earnings have
exceeded expectations. Normally, upcoming reports from Amazon (AMZN) and Alphabet
(GOOGL) this Thursday would drive the market higher, but given current
conditions, they may only serve to cushion the downside impact of trade
tensions.
The Organization of Petroleum Exporting
Countries and its allies (OPEC+) are set to meet on Monday. No immediate policy
changes are expected unless Brent crude prices drop to the support zone of
$68.00–70.00 per barrel. Meanwhile, U.S. labour market data could play a
crucial role in market sentiment. The ADP Nonfarm Payrolls (NFP) report on
Wednesday is expected to provide some positive support, while Friday’s official
U.S. labour report is anticipated to indicate cooling job growth, with NFP
likely decreasing to 154,000 from 256,000 in December. A weaker labour market
could ease concerns over trade tensions and provide a boost to the S&P 500,
potentially closing Monday’s gap and even pushing the index above recent highs.
Large investors remain optimistic about an
upside scenario, as the SPDR S&P 500 ETF Trust (SPY) reported net inflows
of $1.1 billion last week, excluding Friday. However, sentiment could shift as
the impact of tariffs unfolds.
The technical outlook for the S&P 500
continues to weaken. The index previously reached a key resistance zone of
6,050–6,150 points but has now reversed to the downside, targeting 5,650–5,670
points. Immediate resistance is at 6,100–6,120 points, while key support
remains at 5,920–5,940, the last level preventing a deep correction.
Oil prices continue to decline, currently
hovering at $76.90 per barrel, with a downside target of $68.00–70.00 per
barrel. Prices are testing resistance at $78.00–80.00 per barrel from below,
and the upcoming OPEC+ meeting is unlikely to provide support, as members are
expected to discuss production increases.
Gold prices have surged to a new all-time high
of $2,817 per troy ounce. A period of consolidation is likely before a
potential breakout, with the next resistance level at $2,860.
In the currency market, the U.S. Dollar correction
has stalled, with EURUSD opening with a 1.5% gap down to 1.02080 on Monday. If
the pair regains momentum above 1.05700, it could continue toward
1.0950–1.1050.