S&P 500 Momentum Report
Wall Street witnessed a bout of profit-taking last week, as attention is once again turned to the Fed’s policy outlook following the end of the US earnings season.
US jobs data in focus to steer expectations for Fed’s rate-cut timeline
Wall Street witnessed a bout of profit-taking last week, as attention is once again turned to the Federal Reserve (Fed)’s policy outlook following the end of the US earnings season. That said, market sentiments were quick to recover, with the broader risk-on sentiments reflected in the struggle for the VIX to trend higher after a brief spike.
Broad market sentiments are leaning towards a more neutral setting (Fear & Greed Index, AAII investor survey) while market breadth indicators are also far from overbought conditions, which offer a more balanced ground for both the bulls and the bears. While market participants have previously seek comfort in the ‘bad news is good news’ theme to price for impending rate cuts, reaction to poorer economic data lately has been mixed. If the trend of downside economic surprises were to continue, there may be a tendency for rising concerns over growth slowdown to override prevailing optimism around easing Fed policy conditions.
Look-ahead: US non-farm payroll data
Ahead, focus will be on the US non-farm payroll data to steer expectations for the timeline of Fed’s rate cuts. Thus far, markets are leaning towards a September move, but are still relatively split on whether further cuts will take place towards the end of the year.
Current expectations are for the US to add 190,000 jobs in May, up from the previous 175,000, while the unemployment rate is expected to stay unchanged at 3.9%. Average hourly earnings is expected to see a tick higher to 0.3% month-on-month versus the 0.2% prior.
Nasdaq 100: Buyers keeping near-term upward trend intact
After a post-earnings dip, the Nasdaq 100 has managed to regain some footing this week, as buyers seek to defend the mid-line on its daily relative strength index (RSI) to keep the near-term upward trend intact. Thus far, a dip below the 18,500 level this week was met with a bullish rejection, leaving it as immediate support to hold. More broadly, the formation of higher highs and higher lows still kept an upward trend intact, with buyers potentially setting their sight to retest its year-to-date high at the 18,950 level. Any downside may likely find stronger support at the 18,000 level, where an upward trendline stands in place, alongside its daily Ichimoku Cloud support.
Levels:
R2: 19,300
R1: 18,950
S1: 18,500
S2: 18,000
Source: IG charts
S&P 500: Upward trendline support on watch
Similarly, recent retracement in the S&P 500 has been met with some dip-buying, as its daily RSI successfully defended its key 50 level to keep the upward bias intact. An upward trendline since October 2023 seems to serve as key potential support, leaving the 5,200 level on watch in the event of any further retracement. On the upside, the index may attempt to retest its all-time high at the 5,354 level once more, with multiple retests of resistance within a short span of time potentially raising the odds for a successful upward break.
Levels:
R2: 5,485
R1: 5,354
S1: 5,200
S2: 5,000
Source: IG charts
Sector performance
Risk sentiments were treading in a cautious state last week, as defensive sectors outperformed the broader index while other sectors mostly dipped in the red. The S&P 500 closed 0.4% lower, dragged by slight weakness among the tech heavyweights. Microsoft was down 3.9%, while Alphabet, Amazon and Tesla were down more than 1%. The bright spot remains on Nvidia, which bucked the broader market weakness with a stellar 8% gain. Its strength is not mirrored across the tech sector however, as a revenue miss and lacklustre quarterly guidance from Salesforce triggered a wave of sell-off in software application stocks. Its share price managed to pare some losses thereafter but still ended the week down 13%. The underperforming sectors were industrials and energy, with some downside reaction to lower-than-expected US manufacturing activities.
Source: Refinitiv
Source: Refinitiv
Source: Refinitiv
*Note: The data is from 28th May – 3rd June 2024.
Source: Refinitiv
*Note: The data is from 28th May – 3rd June 2024.
Source: Refinitiv
*Note: The data is from 28th May – 3rd June 2024.
This information has been prepared by IG, a trading name of IG Markets Ltd and IG Markets South Africa Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
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