US premarket on July 17th: US stock market retreats from annual highs
July 17, 2023 1:25 pm
During Monday’s trading, futures for US stock indices declined after failing to surpass the annual highs reached last Friday. The decrease in risk appetite cannot be attributed to any specific factor. It is more likely that the market needed a correction to reevaluate the data released last week concerning the US economy. However, the new data indicating a slowdown in the Chinese economy had a definite impact on market sentiment at the beginning of this week. S&P500 futures dropped by 0.2%, while the tech-heavy NASDAQ experienced a 0.3% decline. European stock indices and oil also saw a decline, while bonds rose.
The data indicating growth in China during the second quarter fell short of expectations. The previous anticipation that Chinese consumers, freed from COVID-related quarantine restrictions, would be able to sustain the global economy despite rising interest rates in the US and Europe is becoming increasingly uncertain. According to some economists, weakness in China’s growth has been brewing in the background for the past few months. The fact that growth failed to meet expectations poses some threats to the further expansion of the global economy. However, it is worth mentioning that despite these concerns, the commencement of the Federal Reserve’s interest rate reduction cycle, which I still anticipate later this year, will inject new strength into the market.
Additionally, there is a serious risk of the collapse of a grain deal, particularly following the overnight attack on the Crimean Bridge. This situation raises concerns about food supplies. Wheat futures surged as Russia canceled a grain export deal, citing unmet conditions. This development has put the key trade route from Ukraine, one of the world’s largest grain and vegetable oil suppliers, at risk. MSCI ACWI experienced a 0.1% decline on Monday after a 3% increase the previous week. Mainland Chinese stocks performed the worst in Asia.
In the bond market, the rally continued as investors sought to hedge against any potential downturn in risk assets. The yield on 10-year Treasury bonds decreased by five basis points to 3.77%.
Crude oil futures declined by 1.5% as traders evaluated disappointing economic data from China and the resumption of supplies from Libya amid signs of tightening in the market.
The start of the earnings season is also a significant topic. Over the next few weeks, hundreds of companies will report their earnings. According to data collected by Bloomberg Intelligence, firms in the S&P 500 are expected to report a 9% decline in profits in the second quarter, making it the worst season since 2020. Europe may fare even worse, with an anticipated decline of 12%.
Regarding the technical outlook for the S&P 500, demand for the index remains. Buyers have a chance to continue the upward trend, but bulls need to make a concerted effort to break above $4,515. A breakthrough at this level could trigger a surge towards $4,539. Equally important for the bulls will be to maintain control over $4,589, which would strengthen the bullish market. In the event of a downward movement due to reduced risk appetite, buyers must assert themselves around $4,488. A breakout below this level would quickly push the trading instrument back to $4,469 and open the path to $4,447.
The material has been provided by InstaForex Company – www.instaforex.com
During Monday’s trading, futures for US stock indices declined after failing to surpass the annual highs reached last Friday. The decrease in risk appetite cannot be attributed to any specific factor. It is more likely that the market needed a correction to reevaluate the data released last week concerning the US economy. However, the new data indicating a slowdown in the Chinese economy had a definite impact on market sentiment at the beginning of this week. S&P500 futures dropped by 0.2%, while the tech-heavy NASDAQ experienced a 0.3% decline. European stock indices and oil also saw a decline, while bonds rose.
The data indicating growth in China during the second quarter fell short of expectations. The previous anticipation that Chinese consumers, freed from COVID-related quarantine restrictions, would be able to sustain the global economy despite rising interest rates in the US and Europe is becoming increasingly uncertain. According to some economists, weakness in China’s growth has been brewing in the background for the past few months. The fact that growth failed to meet expectations poses some threats to the further expansion of the global economy. However, it is worth mentioning that despite these concerns, the commencement of the Federal Reserve’s interest rate reduction cycle, which I still anticipate later this year, will inject new strength into the market.
Additionally, there is a serious risk of the collapse of a grain deal, particularly following the overnight attack on the Crimean Bridge. This situation raises concerns about food supplies. Wheat futures surged as Russia canceled a grain export deal, citing unmet conditions. This development has put the key trade route from Ukraine, one of the world’s largest grain and vegetable oil suppliers, at risk. MSCI ACWI experienced a 0.1% decline on Monday after a 3% increase the previous week. Mainland Chinese stocks performed the worst in Asia.
In the bond market, the rally continued as investors sought to hedge against any potential downturn in risk assets. The yield on 10-year Treasury bonds decreased by five basis points to 3.77%.
Crude oil futures declined by 1.5% as traders evaluated disappointing economic data from China and the resumption of supplies from Libya amid signs of tightening in the market.
The start of the earnings season is also a significant topic. Over the next few weeks, hundreds of companies will report their earnings. According to data collected by Bloomberg Intelligence, firms in the S&P 500 are expected to report a 9% decline in profits in the second quarter, making it the worst season since 2020. Europe may fare even worse, with an anticipated decline of 12%.
Regarding the technical outlook for the S&P 500, demand for the index remains. Buyers have a chance to continue the upward trend, but bulls need to make a concerted effort to break above $4,515. A breakthrough at this level could trigger a surge towards $4,539. Equally important for the bulls will be to maintain control over $4,589, which would strengthen the bullish market. In the event of a downward movement due to reduced risk appetite, buyers must assert themselves around $4,488. A breakout below this level would quickly push the trading instrument back to $4,469 and open the path to $4,447.
The material has been provided by InstaForex Company – www.instaforex.com
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