S&P 500
The US market: Is the correction over?
At the end of last week, the US stock market showed two consecutive days of strong gains. As a result, US indices almost reached highs posted on August 16. On Friday, indices closed as follows: Dow +0.7%, S&P 500 +0.8%, NASDAQ +1.2%.
Asian markets kicked off the week with strong gains: Japanese indices +1.8%, China +1.4%.
Commodity market. Oil prices added 2% after a prolonged series of losses - oil has fallen by $6, or about 9%, since August 12. Brent is consolidating above $66. Crude oil prices are growing following the US market.
COVID in the world. Yesterday, the number of average daily cases in the world fell to about 450 K. A sharp decline was also registered in the US (+30 K cases). However, statistics on new cases decline every Sunday, and the third wave indicators are near the highests levels. Thus, it is too early to talk about a downtrend. The main factor remains the fast spread of the Indian coronavirus strain. Developed countries are trying to combat it with the help of selective vaccination for vulnerable groups.
S&P 500: 4,441. Trading range: 4,400-4,480. After a strong rally at the end of last week, the most logical scenario is an attempt to overcome highs. To do this, the main indices need to post an increase of about 1%. The main event of the current trading week is likely to be a new report on inflation from the United States - the core personal consumption expenditures price index for July to be released on Friday. In June, the PCE index rose to 3.5% on an annual basis. However, the retail price index declined in July. After the Fed announced its intention to start curtailing the emergency programs to support the economy, the importance of inflation data declined.
The US central bank reported that equity funds had received net inflows of $23 billion last week. Bond funds turned out to be less attractive (+ $12 billion). Investors are optimistic about the growth prospects of the US market, despite high prices.
Democratic congressional leader Nancy Pelosi faced opposition within her party over Biden's $3.5 trillion economic aid package. Some Democrats demand that the bipartisan $1 trillion infrastructure bill be passed first. Still, there is no doubt that the economic support package will be adopted as the US Senate has already approved it.
USDX: 93.30. Trading range: 93.0–93.60. The US dollar index fell moderately after a strong rally from the level of 92.30. The euro strengthened against the US dollar to 1.1715. The reason is the Fed's intention to change monetary policy. Apparently, the regulator will announce the details on this issue at the next meeting to be held on September 20. Perhaps the US dollar's growth will remain limited until the Fed meeting.
USD/CAD: 1.2760. Last week, the Canadian dollar rose sharply to 1.2900 from 1.2500 but then showed a steep drop to the level of 1.2760. Probably, the pair will slow down in the range of 1.2650-1.2850.
Conclusion. The beginning of the week is expected to be calm. The US market is likely to try to reach highs again.