S&P 500 Reaches Record Highs, Caution Grows Over Valuations and Geopolitical Tensions

On Friday, the Dow Jones and S&P 500 closed at record highs, marking six consecutive weeks of gains for the major indexes. This upward momentum, driven by strong market performance, reflected investor optimism heading into earnings season. However, some rate-sensitive technology stocks, such as Tesla, experienced slight declines.

By Monday, global equity markets experienced losses as rising geopolitical tensions and uncertainty surrounding the U.S. presidential election affected investor sentiment. Wall Street's indexes, including the Dow and S&P 500, fell slightly from their record highs due to concerns over high valuations and increasing Treasury yields. The mixed performance was further impacted by fears of an escalation in the Middle East conflict, contributing to a cautious atmosphere in global markets. Gold futures reached new highs as traders sought safe-haven assets.

Technology stocks showed mixed results, with Nvidia surging to a record high, while the broader Nasdaq index edged higher. The upcoming corporate earnings reports, particularly from major companies like Tesla and chipmakers Texas Instruments and Seagate, have attracted significant attention from investors. Additionally, earnings reports from defense companies like Lockheed Martin and major telecom players such as Verizon and AT&T are expected in the coming days, adding to the market's anticipation.

Other notable moves in the market include Boeing’s 3.1% rise following labor deal news, and Spirit Airlines' 53% jump after reaching a debt refinancing agreement.

Treasury yields surged as the 2-year yield rose by 7 basis points to 4.025% and the 10-year yield hit 4.17%, a 12-week high. This rise reflects investor caution over the future pace of rate cuts, with Fed speakers advocating for a more gradual approach. Minneapolis Fed President Neel Kashkari echoed this sentiment, suggesting modest rate cuts in the coming quarters. Analysts are concerned that rising yields signal the economy might be growing too fast, which could delay further rate cuts.

Investors also turned their attention to corporate earnings and the upcoming U.S. presidential election. Despite stretched valuations, 83.1% of companies that have reported so far exceeded earnings expectations. The presidential race has added volatility to market sentiment, with polls showing increased chances for Donald Trump. Meanwhile, key reports on housing, durable goods, and consumer sentiment are expected this week, along with updates from the Federal Reserve.

Global finance leaders will gather in Washington for the IMF and World Bank meetings to address rising debt levels, while Russian President Putin will host BRICS leaders for a summit. Deutsche Bank analysts expressed caution about the recent rally in the S&P 500, noting that while market performance has been strong, future gains may be harder to achieve given geopolitical risks, economic uncertainties, and stretched valuations.

Data for Technical Analysis (30Min) CFD US 500 [S&P 500]

Resistance : 5846.2, 5846.9, 5848.2

Support : 5843.6, 5842.9, 5841.6     

30Min Outlook  

Source: TradingView                                                                            

Buy/Long 1 If the support at the price range 5840.6 - 5843.6 is touched, but the support at 5843.6 cannot be broken, the TP may be set around 5846.2 and the SL around 5839.1, or up to the risk appetite.

Buy/Long 2 If the resistance can be broken at the price range of 5846.2 - 5849.2, TP may be set around 5852.0 and SL around 5842.1, or up to the risk appetite.       

Sell/Short 1 If the resistance at the price range 5846.2 - 5849.2 is touched, but the resistance at 5846.2 cannot be broken, the TP may be set around 5842.9 and the SL around 5850.7, or up to the risk appetite.

Sell/Short 2 If the support can be broken at the price range of 5840.6 - 5843.6, TP may be set around 5839.0 and SL around 5847.7, or up to the risk appetite.       

Pivot Points Oct 22, 2024 04:09AM GMT