U.S. Stocks Rebound Ahead of Inflation Report, Optimism Persists

U.S. stocks closed higher on Monday, recovering some of the losses from the previous week as investors positioned themselves ahead of the much-anticipated U.S. inflation report scheduled for Thursday. During Monday's evening trading, U.S. stock futures remained within a narrow range. This followed a positive trading session among major benchmark indices, where investors closely analyzed corporate earnings results in anticipation of the significant inflation data to be released.

Last week had witnessed declines in the primary stock indices due to profit-taking after a prolonged period of economic expansion, mixed corporate earnings, and rising Treasury yields. Nonetheless, U.S. stocks have displayed strong performance throughout 2023, with the S&P 500 index experiencing a remarkable 17.7% increase year-to-date. This surge has been fueled by optimism surrounding artificial intelligence advancements and hopes for a smooth economic trajectory.

The upcoming U.S. consumer price report, expected on Thursday, is predicted to provide insights into the future course of the Federal Reserve's monetary policy. This comes after concerns were reignited by Friday's employment report, suggesting the central bank might opt for an extended period of higher interest rates. John Williams, the President of the New York Federal Reserve and a voting member, stated that he foresees a potential decline in interest rates starting in early 2024. Additionally, Governor Michelle Bowman expressed the likelihood of further interest rate hikes to curb inflation towards the 2% target.

The tech-heavy Nasdaq index broke a four-day losing streak, ending a negative run that matched the longest streak seen this year. Despite Tesla's 0.9% drop, the Nasdaq's performance was strong, overcoming challenges. The Nasdaq had experienced a similar four-day losing streak at the beginning of May, with a previous six-session decline in October.

Similarly, the S&P 500 index ended its four-session losing streak, with two other instances of such losses occurring in 2023 (in February and May). The majority of the S&P's major indexes experienced gains, with communication services and financials leading the way, rising by 1.9% and 1.4% respectively.

Earnings reports for the second quarter have outperformed expectations, with 79.1% of the 422 S&P 500 companies reporting beating analysts' estimates, according to Refinitiv data available until Friday. While analysts predict a slight increase in headline inflation compared to June, prices have notably cooled since the previous year. The upcoming report is expected to play a pivotal role in the Federal Reserve's decision-making process during their September meeting, following their quarter-percentage-point interest rate increase in July.

Market futures indicate an anticipation of the Federal Reserve maintaining stability in September. Further moves are anticipated in the remainder of the year, though these decisions are to be driven by incoming data. Alongside the July inflation data, investors will also receive information about wholesale inventories, crude supplies, and unemployment claims for the latest week. Consequently, there is an anticipation that the broader U.S. stock market index might witness a potential for slight additional adjustments during this period.

Data for Technical Analysis (5H) CFD US 500 [S&P 500]

Resistance : 4517.6, 4520.8, 4525.8

Support : 4507.6, 4504.4, 4499.4              

5H Outlook             

Source: Investing.com  

Buy/Long 1 If the support at the price range 4502.6 - 4507.6 is touched, but the support at 4507.6 cannot be broken, the TP may be set around 4517.6 and the SL around 4499.0, or up to the risk appetite.

Buy/Long 2 If the resistance can be broken at the price range of 4517.6 - 4522.6, TP may be set around 4528.0 and SL around 4504.0, or up to the risk appetite.       

Sell/Short 1 If the resistance at the price range 4517.6 - 4522.6 is touched, but the resistance at 4517.6 cannot be broken, the TP may be set around 4503.9 and the SL around 4525.0, or up to the risk appetite.

Sell/Short 2 If the support can be broken at the price range of 4502.6 - 4507.6, TP may be set around 4493.0 and SL around 4520.0, or up to the risk appetite.       

Pivot Points Aug 08, 2023 03:03AM GMT

Sources: Investing 1, Investing 2