S&P 500 broad market index futures are
down 3.37% to 5,750 points, recovering slightly from Thursday’s low of 5,711
points. The market outlook has shifted dramatically from earlier this week when
the index was poised to set new record highs.
The downturn began after U.S. President Donald
Trump announced new tariffs on Mexico, Canada, and China, set to take effect on
March 4. Shortly after, the Atlanta Federal Reserve’s GDPNow model forecasted a
2.8% contraction in U.S. GDP for Q1 2025, triggering an immediate 2.3% drop in
the S&P 500 to 5,807 points. Although the index briefly bounced off
support, the broader sentiment turned bearish. While Trump later delayed tariffs
on Mexico and Canada for 30 days, the expected market recovery never
materialised. The disappointing February ADP Nonfarm Payrolls report, showing
only 77,000 jobs added versus a consensus of 141,000, further rattled
investors. Additionally, U.S. PMI indices indicate a rapid cooling of the
economy, yet the Federal Reserve has yet to respond with easing measures.
Despite these concerns, large investors
continue betting on a market rebound. The SPDR S&P 500 ETF Trust (SPY)
reported net inflows of $15.28 billion last week, the highest in recent months,
up from $11.08 billion previously. However, investors sold $2.66 billion worth
of SPY shares this week, which is not enough to shift their overall long
positioning. Some may be expecting a swift reversal, but further declines could
force a shift in sentiment.
The February U.S. labour market report is set
for release on Friday, with Wall Street analysts expecting Nonfarm Payrolls at
159,000 and unemployment at 4.0%. If confirmed, the S&P 500 could fall further.
Trump may have to intervene to prevent a potential 7% drop.
The S&P 500 is now testing key support at
5,730 points. If it breaks below this level, the index could plummet to extreme
downside targets at 5,300–5,400 points, a 7% additional decline. The overall
correction from the all-time high of 6,147 points could reach 12.9%.
Brent crude remains under pressure at $70.40
per barrel, with support at $68.00–70.00 and resistance at $78.00–80.00. This
week, oil hit a low of $68.63, the weakest level since December 2021. If
support fails, prices could fall further to $58.00–60.00.
Gold prices are holding around $2,920 per troy
ounce, close to the all-time high of $2,954. The next target is $2,950–2,980,
with extreme upside targets at $3,200–3,300. However, a drop below $2,850 would
invalidate the upside scenario.
The U.S. Dollar weakened after Germany
announced a massive government spending plan, which is expected to push
borrowing costs higher and strengthen the Euro. The EURUSD pair broke through resistance at 1.05700 and is now heading
towards 1.09500–1.10500, currently trading at 1.08600. However, overbought
conditions suggest a possible retreat to 1.06000.