S&P 500 rises, Nasdaq 100 on brink of exit from bear market territory, NFP

US stocks overview:

  • S&P 500 and Nasdaq 100 rose on positive market sentiment after better-than-expected ISM PMI results
  • Strong US service sector data indicates that the economy is not about to fall off the cliff
  • To better gauge the strength of the recovery, traders should closely watch the US labor market survey scheduled for Friday

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After a poor performance earlier this week, US stocks rose on Wednesday amid upbeat investor confidence after key data showed that the US economy remains resilient and inflationary pressures are turning a corner. When all was said and done, the S&P 500 rose 1.56% to 4155, with all sectors of the index closed in positive territory, except for energy, which suffered heavy losses on the back of the sharp drop in oil prices. For its part, the Nasdaq 100 jumped 2.73% to 13253, closing at its best level since May 5 and moving away from bear market territory, buoyed by a strong rally in Amazon, Meta Platforms and Apple shares.

A PMI report released earlier by the Institute for Supply Management (ISM) revealed that non-manufacturing activity unexpectedly rebounded in July, expanding at the fastest pace in three months, easing fears that the country was heading into a recession. On the inflation front, the ISM survey’s Price Paid Index slipped to 72.3 from 80.1 in June, a sign that the cost burden on providers is not growing as fast as it was earlier in the year. If this trend continues, CPI readings could start to fluctuate rapidly this fall, paving the way for the Fed to adopt a less hawkish policy stance before the end of 2022. This scenario could be bullish for stocks.

Elsewhere, comments by Mary Daly, president of the Federal Reserve Bank of San Francisco, that it would be reasonable for the US central bank to raise interest rates by half a percentage point instead of 75 basis points at the Federal Open Market Committee meeting in September, boosted the mood Investors, accelerating the buying interest on Wal. Street. While it may be premature to take a stance on changing monetary policy at this point in light of elevated inflation risks, traders are raising bets that the Fed will focus later this year and begin cutting interest rates in 2023 to counteract the economic slowdown. .

To better prepare for what lies ahead in the field of stocks, it is important to monitor the incoming data. There are no major impact events on the calendar on Thursday, but Friday brings the July Nonfarm Payrolls report. Forecasts in a Bloomberg News survey indicate that US employers created 250,000 jobs last month, after adding 372,000 workers in June. For sentiment to improve further, employment numbers must remain healthy, but not too high, as tight labor markets can boost wage pressures and thus inflation. However, any result close to expectations could be supportive of risk assets, provided that average hourly earnings continue to decline.

S&P 500 تقني Technical Chart

After a strong rally on Wednesday, the S&P 500 reached the door of major technical resistance at 4160-4175, but failed to remove that barrier. For the bullish momentum to extend, we need to see a decisive break above 4160 – 4175 in the upcoming sessions. If this scenario is implemented, the index could be on the way to challenge the 200-day SMA and point the resistance around the psychological handle 4300. On the flip side, if the sellers come back and trigger a bearish reversal from the current levels, initial support will appear at 4065. If invalidated This floor, traders should prepare for the possibility of a pullback towards 3,920 near the 50-day simple moving average.

S&P 500 تقني Technical Chart

S&P 500 chart created using TradingView

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— By Diego Coleman, Market Strategist, DailyFX

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