Impact of Mixed US Data on Global Stock Markets
Today, the global stock markets, including Europe and Asia, experienced a decline following Wall Street’s downturn the day before. Despite a brief rebound in US indices, thanks to mixed-bag US data, the overall trend remains bearish. The recent rally has been shaky, with technical damage and lack of major retracements making it challenging for investors to justify continued buying of stocks. The S&P 500 forecast reflects this bearish sentiment until new developments emerge.
Mixed US Data Lifts Fed Rate Cut Odds
In response to today’s mixed US data, there was a slight bounce in stock indices and a small recovery in the USD/JPY. Despite strong GDP figures, weaker GDP deflator and core PCE prices raise concerns about inflation levels. The odds of rate cuts are on the rise, as timelier data like jobless claims and durable goods numbers point to weakness. Could this weaker US data trigger a rebound in risk assets?
Factors Behind the Recent Stock Market Decline
The recent decline in the stock market can be attributed to disappointing earnings from tech giants like Alphabet and Tesla. Investor expectations for the earnings season have not been met, leading to cautious sentiment. Investments in AI and high revenue cost currently challenge companies like Alphabet. The performance of major tech firms in upcoming earnings releases will be crucial for market sentiment.
S&P 500’s First Significant Drop
The S&P 500 recorded a 2.3% decline on Wednesday, the worst since December 2022. This decline affected technology stocks, particularly Nasdaq 100 companies like Alphabet and Nvidia. While valuations have dropped, caution is advised pending earnings results from major tech firms next week.
Source: TradingView.com
S&P 500 Forecast: The Role of the Fed
The recent market downturn and weak US data could prompt the Federal Reserve to consider rate cuts. A steeper US yield curve signals market anticipation of aggressive rate cuts. While a rate cut at the upcoming meeting is unlikely, any unexpected decision could significantly impact stock prices. The more plausible scenario is a market preparation for a rate cut in September, followed by another before year-end.
S&P 500 Technical Analysis
Dip-buying has been a notable strategy in 2024, but caution is advised given recent market dynamics. The critical bullish trendline at 5390 on the S&P 500 chart must hold for potential dip-buying opportunities. A short-term bounce towards resistance levels or further decline to support levels will depend on market conditions and technical indicators.
In conclusion, the S&P 500 forecast relies on earnings reports, Fed decisions, and technical support levels. Market participants should remain vigilant amidst short-term fluctuations and macroeconomic factors.
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