U.S. Stock Futures Dip Amid Inflation Concerns, and Market Volatility Ahead of Earnings Season

U.S. stock futures dipped on Monday after a strong Friday rally fueled by a better-than-expected jobs report that underscored the labor market’s strength. This labor data led traders to reduce bets on large Federal Reserve rate cuts, with Treasury yields climbing as rate cut expectations cooled.

The market faced additional challenges, including rising oil prices amid Middle East tensions and concerns over Hurricane Milton, which is anticipated to impact the U.S. this week following the devastating effects of Hurricane Helene. Sentiment was further dampened by a judge’s order for Alphabet’s Google to modify its mobile app store to provide more user options, weighing down tech stocks. Negative analyst reports also pressured Amazon and Apple, driving their stocks lower.

Alphabet Inc.’s stock dropped over 2% after a U.S. judge ruled in favor of Epic Games’ antitrust suit, requiring Google to allow alternatives to its Play Store on Android. Meanwhile, Pfizer saw a 2.2% increase following news that Starboard Value acquired a $1 billion stake to push for a turnaround of the company. Hershey shares slipped 2% after UBS downgraded the stock over margin concerns due to inflation, and Amazon fell more than 3% as Wells Fargo downgraded it, citing competitive pressure from Walmart.

In the broader market, only the energy sector rose among the S&P 500’s eleven sectors, up 0.4%, driven by U.S. crude oil prices climbing 3.7% amid Middle East supply worries. Utilities and communication services lagged, weighed down by Alphabet’s 2.5% decline. Apple also pressured the index with a 2.3% drop after Jefferies gave it a “hold” rating. Generac Holdings gained 8.5%, as investors anticipated higher demand for backup generators due to an approaching hurricane.

Investors now await the upcoming Consumer Price Index and Producer Price Index reports, key measures of inflation due later in the week, and the start of the third-quarter earnings season, beginning with major bank reports. The labor market’s resilience may suggest stability, but inflation data will be critical in guiding the Fed’s stance on any further rate cuts.

Goldman Sachs has updated its 12-month S&P 500 target to 6300, projecting a 10% annual price return, but warns that high valuations could limit gains. They also predict a potential upside of 15% if the P/E multiple stays high or even 20% if it reaches the 2021 average.

Goldman Sachs revised its U.S. recession probability down to 15% after September’s employment data showed unexpected resilience. They noted that job growth stabilized with a drop in unemployment and saw this as supporting the Federal Reserve’s gradual rate-cut path.

Bank of America sees increased implied volatility in individual stocks this earnings season, indicating greater post-earnings movement. Last quarter’s underestimation of stock moves suggests that options for single stocks may yield significant returns if volatility trends continue. As long as inflation remains manageable, strong economic indicators are likely to support stocks, with Thursday’s CPI data potentially causing the largest CPI-driven market shift since May.

This week will feature important updates on consumer sentiment, small-business optimism, and the FOMC meeting minutes. The third-quarter earnings season also begins, with major banks like JPMorgan, Wells Fargo, and BlackRock reporting Friday, along with PepsiCo and Delta earlier in the week.

Data for Technical Analysis (1H) CFD US 500 [S&P 500]

Resistance : 5700.6, 5702.7, 5706.1

Support : 5693.8, 5691.7, 5688.3                                     

1H Outlook

Source: TradingView                                  

Buy/Long 1 If the support at the price range 5683.8 - 5693.8 is touched, but the support at 5693.8 cannot be broken, the TP may be set around 5702.5 and the SL around 5678.8, or up to the risk appetite.

Buy/Long 2 If the resistance can be broken at the price range of 5700.6 - 5710.6, TP may be set around 5718.5 and SL around 5688.8, or up to the risk appetite.       

Sell/Short 1 If the resistance at the price range 5700.6 - 5710.6 is touched, but the resistance at 5700.6 cannot be broken, the TP may be set around 5693.6 and the SL around 5715.6, or up to the risk appetite.

Sell/Short 2 If the support can be broken at the price range of 5683.8 - 5693.8, TP may be set around 5676.3 and SL around 5705.6, or up to the risk appetite.       

Pivot Points Oct 8, 2024 03:27AM GMT