US Stock Futures Reflect a Limited Trend Due to Treasury Yields Concerns

US stock futures saw an increase in Sunday evening trading after major benchmark indexes ended the week at multi-month lows. Investors are preparing for a week filled with earnings reports and economic data. The S&P 500 and Nasdaq Composite indices have entered a correction phase, experiencing declines exceeding 10% over the past week. The Dow Jones Industrial Average also fell, closing at 32,417.59 points. This market decline is primarily attributed to rising Treasury yields and various economic and geopolitical concerns, causing worries among Americans as it may affect mutual funds tied to these indices.

Despite the overall market downturn, shares of tech giants like Amazon, Microsoft, and Apple saw gains last week. Amazon's stock increased by over 6% due to positive investor sentiment about its Q3 update and Q4 forecast, which also had a positive impact on Microsoft and Apple. However, not all tech stocks fared well, with companies like Meta Platforms Inc, Tesla, Alphabet, Nvidia Corporation, and Netflix experiencing weekly losses.

In other sectors, Ford Motor Company and Exxon Mobil Corporation saw stock declines due to negative quarterly reports and guided quarterly results. Chevron Corporation's shares also fell due to concerns about quarterly figures and its $53 billion bid for Hess Corporation.

The financial markets are anticipating a significant week with a Federal Reserve meeting, U.S. employment data, and Apple's earnings, potentially shaping the trajectory for stocks for the rest of the year. The bond market's performance may play a crucial role in the remainder of 2023. The Federal Reserve's stance on interest rates and fiscal concerns have pushed the 10-year Treasury yield to 5%, the highest since 2007, which is seen as a challenge to stocks as they compete for investor attention. Investors are concerned that yields may rise further if the Fed reinforces its hawkish stance at the November monetary policy meeting. Strong U.S. employment data could also contribute to rising yields.

Futures markets indicate a strong possibility that the Fed will not raise rates in November and a nearly 80% chance that rates will remain steady in December. However, policymakers project that the key policy rate will remain at current levels through most of 2024, longer than what the markets previously anticipated.

Consumer spending surged in September, with strong growth as households purchased motor vehicles and traveled, maintaining spending growth into the fourth quarter. However, this strong spending is expected to cool off in early 2024 as accumulated savings from the pandemic are depleted.

Despite robust consumer spending and inflation concerns, the Fed is expected to implement the first rate cut in June 2024. U.S. GDP growth was 4.9% in the third quarter, and signs of an overheated labor market or the need for further tightening to control inflation could lead to more volatility.

The escalating conflict in the Middle East has heightened concerns among investors as the U.S. dispatches military assets to the region. An escalation of the conflict leading to increased war-related spending and a rising deficit could push Treasury yields even higher, potentially prompting safe-haven buying of Treasuries, which could moderate the surge in yields and reduce pressure on stocks and other assets.

This week, investors will closely watch key economic indicators, including CB consumer confidence, ADP nonfarm employment change, ISM manufacturing PMI, JOLTs job openings, and the Federal Reserve's interest rate decision. The highlight will be Friday's release of the nonfarm payrolls report for October. After September's robust job gain, economists expect a more modest increase, with the unemployment rate staying at 3.8%. Wage growth is predicted to ease to 4% year-on-year, marking a post-pandemic low. On Tuesday, market participants will analyze third-quarter employment cost data to gauge wage growth trends.

As a result, should there be a surge in the acquisition of US government bonds, it could potentially impact the entire US stock market. Anticipated consequences include the stock market facing continued strain, largely staying within a limited range. There is a chance of finding support in this situation if significant companies outperform expectations in their earnings reports and if investor and consumer sentiment remains positive, especially as the holiday season approaches.

Data for Technical Analysis (1H) CFD US30 DJIA

Resistance : 32511.7, 32518.3, 32529.1

Support : 32490.1, 32483.5, 32472.7                    

1H Outlook      

15Min Outlook   

Source: Investing.com                                 

Buy/Long 1 If the support at the price range 32410.1 - 32490.1 is touched, but the support at 32490.1 cannot be broken, the TP may be set around 32513.3 and the SL around 32370.0, or up to the risk appetite.

Buy/Long 2 If the resistance can be broken at the price range of 32511.7 - 32591.7, TP may be set around 32850.0 and SL around 32450.0, or up to the risk appetite.       

Sell/Short 1 If the resistance at the price range 32511.7 - 32591.7 is touched, but the resistance at 32511.7 cannot be broken, the TP may be set around 32485.1 and the SL around 32630.0, or up to the risk appetite.

Sell/Short 2 If the support can be broken at the price range of 32410.1 - 32490.1, TP may be set around 32150.0 and SL around 32551.0, or up to the risk appetite.       

Pivot Points Oct 30, 2023 03:18AM GMT