US stock index futures continued to rise in morning trading on Thursday. Yesterday, the assets managed to reach above monthly highs.
Investors ignored warnings about the rise in the bond market, taking advantage of the oil prices falling to their lowest level in almost six months. The fact is that lower energy prices allow the Fed to relieve some of the pressure on the economy, which continues to struggle with high inflationary pressures caused in part by soaring commodity prices. At the moment, Nasdaq 100 futures are up 0.55% and 19% from their low of June 16. With investors ignoring the Fed's actions, though this is translating into subdued demand in the bond market, the yield curve warns of economic risks. While the S&P 500 is returning to its highest level in two months, a global wave of monetary tightening risks reversing those gains.
On the one hand, investors believe that reasonable growth may support continued inflationary pressures and thus encourage the Fed to act more aggressively. On the other hand, slowing growth is likely to weaken inflation and allow the Fed to stop tightening policy, thus preserving risk appetite.
Treasuries have fallen, pushing the yield on 10-year US bonds to 2.73%.
As for the commodities market and oil prices, a slight decline in quotations occurred after investors weighed the weak gasoline demand in the US and the growth of stocks amid an increase in supply from OPEC+.
Tensions between the US and China remain among the uncertainties clouding the outlook. Taiwan is preparing for the Chinese military to begin firing in an exercise around the island in response to a visit by US House Speaker Nancy Pelosi. China has suspended imports of some fish and fruit from Taiwan, citing excessive pesticide residues found in the products since last year. Exports of natural sand used in construction have also been banned. According to DBS Group Holdings Ltd. data, Taiwan's agricultural exports accounted for only 0.6% of total exports last year, while sand exports from China to the island totaled just over $1 million last year. Therefore, the bans are likely to have little impact on Taiwan's economy.
Premarket
Glencore Plc shares fell by 2% as its capital-return plans overshadowed strong January-June results.
Alibaba reported financial results for the quarter that exceeded expectations, which led to a rise in shares in the premarket. Shares of the Chinese e-commerce giant in Hong Kong rose by more than 4%, while Alibaba's US-listed securities jumped by 7%. Revenue was £205.55 billion ($30.68 billion) against an expected £203.19 billion. Earnings per share were £11.73 against expectations of £10.39, a 29% year-over-year decline. Net income was £22.73 billion against an expected £18.72 billion.
The technical picture of the S&P 500
At the moment, buyers feel safe. However, they need to hold the index above $4,157, which will keep the advantage on their side and shift the focus to the nearest resistance of $4,197. Following this scenario, we will see quite active growth of the index to the area of $4,234, where large sellers may come back to the market. At least, there will be those, who wish to fix profits on long positions. The next target will be located at the level of $4,265. With weak corporate reports or worsening US-China relations and a breakthrough of $4,157, buyers have to defend the support of $4,122, which is slightly below the area of $4,089. A breakthrough of this level is likely to push the index back to $4,064 and $4,038. The trading instrument can also slide down to the area of $4,003. The further target remains at $3,968, where buyers may start to act more aggressively again.