U.S. Stock Futures Surge on Rate Cut Hopes; Investors Brace for Second Quarter Challenges

U.S. stock futures surged after a market holiday, buoyed by weaker-than-expected February price data, hinting at a potential interest rate cut by the Federal Reserve in June. Wall Street welcomed the second quarter positively, especially with China's manufacturing activity showing growth.

In recent trading, Dow and S&P 500 experienced slight declines due to concerns over the timing of interest rate cuts following stronger-than-expected manufacturing data. The Nasdaq closed slightly higher, led by the technology sector. Among notable decliners, AT&T shares slipped due to a data leak, while Microsoft rose as it planned to offer its Teams app separately from its Office suite globally, addressing EU antitrust concerns. The S&P 500 achieved a record high last week, with the Dow also reaching a new high.

The first quarter saw significant gains, driven largely by the performance of chip stocks like Nvidia, which surged due to high demand for artificial intelligence technology. Bank of America remains optimistic about Nvidia and other AI chip stocks. Micron Technology rallied after an increase in its price target by Bank of America, reflecting expectations of higher demand for memory chips for AI purposes. Meanwhile, Tesla raised prices for its Model Y variants amid concerns of weak demand.

Strong U.S. manufacturing data propelled the dollar and U.S. Treasuries to high levels, influencing market sentiment globally. Despite Wall Street holding up reasonably well, the dollar's momentum remained strong, with hedge funds increasing their net long dollar position.

Following a remarkable performance in the first quarter of the year, investors are cautious as they await potential bumps in the second quarter, especially regarding the Federal Reserve's interest rate decisions and upcoming corporate earnings reports.

The S&P 500 saw substantial gains of over 10%, with key players like chipmaker Nvidia and Meta Platforms contributing significantly. However, the sustainability of this rally hinges largely on the Fed's actions, as well as the strength of corporate earnings. Despite initial expectations for multiple rate cuts, the market now anticipates fewer cuts due to signs of resilience in the U.S. economy.

Economic indicators, including ISM data and non-farm payrolls, will provide further insight. Analysts note historical trends suggesting a potential slowdown in market momentum as the Fed approaches rate cuts, emphasizing the importance of earnings performance in shaping market direction. High interest rates may impact consumer and corporate spending, adding another layer of complexity to market dynamics in the coming months.

Data for Technical Analysis (1H) CFD US30 DJIA

Resistance : 39447.5, 39453.6, 39463.4

Support : 39427.9, 39421.8, 39412.0                  

1H Outlook

Source: TradingView                         

Buy/Long 1 If the support at the price range 39377.9 - 39427.9 is touched, but the support at 39427.9 cannot be broken, the TP may be set around 39450.6 and the SL around 39353.0, or up to the risk appetite.

Buy/Long 2 If the resistance can be broken at the price range of 39447.5 - 39497.5, TP may be set around 39540.0 and SL around 39403.0, or up to the risk appetite.       

Sell/Short 1 If the resistance at the price range 39447.5 - 39497.5 is touched, but the resistance at 39447.5 cannot be broken, the TP may be set around 39424.9 and the SL around 39522.0, or up to the risk appetite.

Sell/Short 2 If the support can be broken at the price range of 39377.9 - 39427.9, TP may be set around 39330.0 and SL around 39497.0, or up to the risk appetite.       

Pivot Points Apr 2, 2024 02:03AM GMT