S&P 500 index futures are rising by 0.1%
to 5562 points on Monday, slightly below the all-time high of 5570 points set
last Friday. The benchmark may update this record this week. Nonfarm Payrolls
for June exceeded Wall Street's consensus of 191,000, with the actual reading
hitting 206,000. However, unemployment unexpectedly rose to 4.1% from 4.0%, the
highest since November 2021. Average hourly earnings slowed down to 0.3% MoM
from 0.4% MoM.
U.S. 10-year Treasury yields rolled back to
4.27% from 4.33%. Bets on interest rate cuts by the Federal Reserve (Fed) in
September rose dramatically to 76.9%. Large investors mostly ignored these
developments, with the SPDR S&P 500 ETF Trust (SPY) reporting low net
outflows of $18.0 million. Perhaps they are wary of the extremely high S&P
500 levels, which are too risky for opening new long positions. This caution is
notable, especially since large investors put $16.6 billion into the SPY during
the last week of June.
Fed Chair Jerome Powell will be speaking on
Tuesday and Wednesday, presenting the quarterly report to Congress. The Fed
needs to deliver some dovish messages if it plans to cut interest rates in
September. However, inflation could remain stubborn in June, considering the
5.0% rise in oil prices last month. June inflation data will be published on
Thursday, with Wall Street expecting prices to slow down to 3.1% YoY and rise
to 0.1% MoM from 0.0% MoM in May. Market participants might not correctly
interpret Powell’s messages, making market reactions to the inflation data on
Thursday potentially very strong.
The Q2 corporate reporting season will start
with the banking sector on Friday. Analysts expect corporate profits of the
S&P 500 listed companies to rise by 8.8% compared to Q2 2023, with the
banking sector expected to expand its profit by 4.3% YoY. The stock market is
unlikely to show a strong reaction unless this forecast is dramatically missed,
indicating increasing market instability.
From a technical perspective, the S&P 500
index outlook has changed slightly. It has surpassed its primary targets of
5250-5350 points and is now aiming for extreme targets, which are now slightly
lower at 5580-5680 points, down from 5650-5750 points. This is very close to
the current levels. Immediate resistance is at 5570-5590 points, with support
at 5470-5490 points.
Oil prices are holding above the support level
of $80.00-82.00 per barrel for Brent crude and hit the resistance at
$88.00-90.00 per barrel. Prices are now retreating, and a technically favorable
period for oil prices has ended, limiting upside potential. The chances for a
drop in Brent prices to $80.00-82.00 per barrel are rising.
Gold prices, having reached mid-term targets
of $2000-2100 per troy ounce, are now eyeing extreme targets of $2400-2500.
There is limited room for further increases, and a pullback could occur soon.
For a downside scenario targeting $2200 per ounce to materialize, support at
$2300-2320 must be breached. Immediate resistance is at $2390-2410.
The Dollar is under pressure, with EURUSD
climbing above 1.07700 on political uncertainties and weak macroeconomic data
from the U.S. The cooling of the U.S. labor market failed to send the pair
above 1.08500. Investors are waiting for Powell's statements and the inflation
report, which may either reverse the pair towards 1.05000 or develop a new
upside pattern with targets at 1.10000.