S&P 500 broad market index futures are
rising by 0.4% to 5588 points. The index peaked by 1.7% this week, setting a
new all-time high at 5653 points.
Federal Reserve (Fed) Chair Jerome Powell’s
testimony to Congress this week was mostly neutral. Powell acknowledged the
cooling labor market but reiterated that stubborn inflation necessitates
maintaining high interest rates. This stance hinted at a potentially
disappointing inflation report for June. However, the numbers were outstanding:
headline inflation dropped to 3.0% YoY compared to the forecasted decline to
3.2%. On a monthly basis, a deflation of 0.1% was recorded against the expected
inflation of 0.1%. Core CPI also declined better than expected.
These inflation numbers are likely to persuade
the Fed. Bets on interest rate cuts by the Fed in September surged to 92.6%,
according to the CME FedWatch Tool. Chicago Fed President Austan Goolsbee
called the June inflation report “profoundly encouraging,” helping to build
confidence that inflation is on its way to the 2% target.
Despite such encouraging developments, the
S&P 500 index plunged by 0.8% in a single day on Thursday. The tech-heavy
Nasdaq 100 dropped by 2.2%, while the Russell 2000 small-cap stocks rose.
Investors might also be concerned about a series of Joe Biden slip-ups at the
NATO summit this week, raising doubts about his suitability for the presidency.
Additionally, from a historical perspective, a lowering of Fed interest rates
is often followed by a stock market correction. There is little time left
before the Fed meeting in September, so some investors may start selling now.
However, this is not confirmed by fund inflows at the moment. The SPDR S&P
500 ETF Trust (S&P 500) reported net inflows of $591 million this week,
which might seem low given the robust growth of the stock market this week.
Inflows could increase by the end of the week.
Investors are now waiting for the Q2 2024
corporate reporting season to start. The American banking sector will begin
reporting on Friday. Wall Street expects S&P 500 listed companies' profits
to rise by 4.3% YoY, below the average of 8.8% YoY. Final figures could be
better than estimated.
From a technical perspective, the S&P 500
index outlook has changed slightly. It has surpassed its primary targets of
5250-5350 points and also hit extreme targets at 5580-5680 points. Immediate
resistance is at 5670-5690 points, with support at 5570-5590 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, while the
next is located at $2490-2510 per ounce.
The Dollar lost 0.4% this week, changing the
formation for the EURUSD to the upside with targets at 1.10000-1.11000. The
pair went above 1.08500 after the U.S. inflation release for June. It could
soon retest the 1.08100-1.08400 zone. If the support survives, the pair will
continue up. Otherwise, it may reverse to the downside towards 1.05000.