S&P 500
broad market index futures are rising by 1.5% to 5911 points heavily retreating
from the all-time high at 6026 points set on November 11. The rally driven by Donald Trump’s presidential
victory appears to be losing momentum following disappointing inflation data
and hawkish comments from Federal Reserve (Fed) Chair Jerome Powell.
October’s headline
inflation increased to 2.6% YoY 2.4%, while core inflation remained stable at
3.3%. So, rising crude oil prices in early October did contributed to the
inflation spike. Powell dismissed the urgency of further rate cuts, citing the
strength and resilience of the U.S. economy, dampening hopes for an accelerated
easing cycle. As a result, market expectations for a quarter-point rate cut in
December dropped to 62.6%, down from 83.0% previously. Additional inflationary
pressure came from the October Producer Price Index, which rose to 2.4% YoY,
exceeding expectations.
Nevertheless,
interest rates cut is still a baseline scenario for the next Fed meeting in
December. But if Powell continues to insist on the hawkish vector of Fed
policies, or even amplify it December interest rates cuts could become questionable.
x
Negative
information was partially offset by a slight decrease in Initial jobless claims
last week in the U.S. All-in-all, a disappointment squeezed investors’ minds.
The S&P 500 index dropped by 0.78% to 5946 points on Thursday and continues
to drop by another 0.50% to 5919 points on Friday. October retail sales data
could improve the situation today as they are expected to decrease to 0.3% from
0.4%. This may hammer Powell’s unexpected trust in the American economy strength.
Extreme
targets for S&P 500 index at 6100-6200 points remain intact. The SPDR S&P 500 ETF Trust (SPY) reported
strong inflows, with $9.7 billion last week and another $2.9 billion this week,
indicating continued optimism among large investors. If they are not afraid of Powell hawkish
considerations than this upside target could be in focus next week. No major
macroeconomic data could dramatically affect stock market trajectory next week.
From a technical
standpoint, the outlook for the S&P 500 index has been unchanged. The
benchmark has surpassed primary targets at 5700-5800 points and restarted the
rally toward the 6100-6200 extreme targets. The benchmark failed to surpass the
resistance at 6010-6030 points and is rolling back to the support at 5910-5930
points.
In the commodities
market, oil prices are under pressure after the victory of Donald Trump. Brent
crude prices are hovering around $71.80 per barrel. With a favourable upside
period for oil prices all eyes now are on Donald Trump and his actions. The
nearest resistance is at $78.00-80.00, while the support is at $69.00-71.00 per
barrel.
Gold prices have
passed the resistance at $2,710-$2,730 per troy ounce and are now retreating by
6.5% to $2,569 per troy ounce, which is at the bottom of the support range at $2,560-2580
per ounce. Any further declines below that level could reverse existing formation
to the downside. If prices would climb above $2,710-2,730 per ounce once again
the rally towards $2,870-2,890, with potential highs of $3,200-$3,300 per ounce
may resume.
In the currency
market, another wave of the Dollar strengthening shook the market, pushing
EURUSD down by 1.3% to 1.05700. While oversold pressures are building, the
Dollar remains dominant, leaving room for a potential corrective rally.