S&P 500 futures are down 0.8% this week to
5,818 points, drifting lower on Thursday but showing signs of recovery after
hitting a weekly low of 5,761 points. Analysts cite various factors for this
correction, with some pointing to lackluster Q3 earnings from major firms like
IBM, while others attribute it to rising interest rates, as U.S. 10-year yields
reached 4.26%. However, with the U.S. presidential election on November 5
approaching, the correction may lack solid footing, and a recovery seems more
likely.
Tesla (TSLA) gave a strong earnings report,
achieving its highest YTD profits and projecting a 20-30% sales increase next
year, sparking a 21.9% surge in its stock to $260.48. This bolstered optimism
for the tech sector, as key players like Alphabet (GOOG), Microsoft (MSFT),
Meta (META), Apple (AAPL), and Amazon (AMZN) are set to report next week. Even
moderately positive results from these tech giants could propel the S&P 500
to new highs.
On the macroeconomic front, U.S. manufacturing
and services PMI exceeded expectations. Manufacturing PMI rose to 47.8 (vs.
47.5 forecast), and services PMI climbed to 55.3, defying an anticipated dip to
55.0. This economic strength supports market optimism heading into Friday, with
the S&P 500 likely to continue its recovery as corporate earnings reinforce
sentiment. Next week’s U.S. labor market report will be crucial, with Wall
Street expecting Nonfarm Payrolls to slow to 140,000 from September’s 223,000.
This report, the last major data point before the election, could sway support
toward Democratic nominee Kamala Harris if the numbers are strong.
Investor sentiment remains positive, evidenced
by the SPDR S&P 500 ETF Trust (SPY), which saw minimal outflows of $60.0
million this week following last week’s $9.5 billion inflow. This points to
confidence in a continued rally in the coming weeks.
From a technical
standpoint, the S&P 500 has achieved its initial target of 5700-5800 points
and is holding above this level. The index is on track toward the 6100-6200
range. The next resistance lies at 5900-5920 points, with support at 5780-5820
points.
In the commodities
market, Brent crude oil prices have risen to $76.70 per barrel this week and retreated
$75.00 per barrel by the end of the week. Prices continue to be volatile amid elevated
geopolitical tension in the Middle East. The nearest resistance is at $78.00-80.00,
while the support is at $70.00-72.00 per barrel. It is unlikely that prices
would breach this range before elections in the U.S.
Gold prices are
struggling to surpass the resistance at $2,710-$2,730 per troy ounce. If no
significant reversal occurs, gold is likely to continue its rise towards
extreme targets of $2,800-2,820, with potential highs of $3,200-$3,300 per
ounce.
In the currency
market, the EURUSD is forming a reversal to the upside. The pair is trading neutral
on Friday at 1.08270, signalling a potential correction of the Greenback. If
the pair accelerates to the upside it is likely to return to 1.10000-1.11000
range.