S&P 500 Momentum Report

Slew of US economic data on watch this week to support soft landing hopes

Wall Street looks set to round up August with its fourth straight month of gains, but within, it has been a turbulent ride so far, with earlier recession scare finding some eventual calm. We may be set for another wild ride in September, as we look towards a busy line-up of central bank meetings and as usual, chatters have surfaced about the weaker seasonality during this period of the year.

Attention will be on a series of US economic data this week, starting with the US Institute for Supply Management (ISM) manufacturing Purchasing Managers' Index (PMI) data later tonight. With broad consensus still rooting for a soft landing scenario, market participants will want to see an improvement in the data to offer some reassurances. Expectations are for the manufacturing PMI to improve to 47.5 from prior 46.8.

The key risk event this week will no doubt be on the US non-farm payrolls. July has seen a surge in unemployment rate (4.3%) past the Federal Reserve (Fed)’s own economic projections for 2025 and 2026, which triggered worries that the Fed is falling behind the curve on rate cuts. With some blame on seasonal factors, markets will be hoping to see an improvement in unemployment rate to 4.2% this time round to reflect some resilience still in the US labour market.

Nasdaq 100: Sentiments on hold for key US labour data ahead

The Nasdaq 100 index remains stuck in its near-term consolidation as the holiday-shortened week in the US may limit some risk-taking, but that could be set to change with a slew of key economic data ahead. Thus far, its daily relative strength index (RSI) has managed to stay supported above its mid-line last week, as it hovers back at its daily Ichimoku Cloud zone.

For now, the 19,900-20,000 range may serve as near-term resistance to overcome for the index. On market breadth, the percentage of Nasdaq 100 stocks above its 20-day moving average (MA) remains at a near-term extreme (84%), which may call for some near-term cooling. Any move above the 20,000 level may pave the way for a retest of its record high at the 20,760 level while on the downside, the 18,920 level may serve as immediate support to hold.

Levels:

R2: 20,760
R1: 20,000

S1: 18,920
S2: 17,300

Source: IG charts

S&P 500: Awaiting the catalyst to push for a new record high

The S&P 500 continues to hang less than 1% away from its record high, as market participants await the catalyst for a fresh break to new record high. This could come in the form of economic resilience this week, particularly from the US non-farm payroll data, which has previously triggered a recession scare.

Similarly, short-term market breadth suggests that the percentage of S&P 500 stocks above its 20-day MA stands at an extreme (91%) for now. Nevertheless, the broader upward trend is likely to persist, as its weekly RSI continues to trade above its mid-line. A move to fresh all-time high may lay eyes on the key psychological 6,000 level next for a retest. On the downside, any cooling in the rally may leave the 5,452 level on watch as potential support to hold.

Levels:

R2: 6,000
R1: 5,674

S1: 5,452
S2: 5,279

Source: IG charts

Sector performance

Sector performance over the past week reflected further rotation from growth sectors into the laggards, with technology and communication services sectors seeing slight losses while traction were headed to the financial, industrial and material sectors. Notably, financials have been pulling ahead lately, being the top-performing sector on a one-month basis. The technology sector was weighed by a 7.7% sell-off in Nvidia over the past week, while other Magnificent Seven stocks were relatively subdued as well. Meta was down 1.3%, Tesla was down 2.8% while Alphabet’s Google was down 1.4%. As we head into the September Fed meeting, more broadening out of gains towards the laggard sectors will remain a key theme to watch ahead, with still-trailing year-to-date performance suggesting further room for catch-up.

Source: Refinitiv

Source: Refinitiv

Source: Refinitiv
*Note: The data is from 27th August – 2nd September 2024.

Source: Refinitiv
*Note: The data is from 27th August – 2nd September 2024.

Source: Refinitiv
*Note: The data is from 27th August – 2nd September 2024.