US stock index futures advanced slightly on Tuesday after Monday's major sell-off, as investors remain tense in the run-up to the Jackson Hole Economic Symposium later this week. S&P 500 and Nasdaq 100 futures gained 0.3% and 0.2% respectively, while the Dow Jones Industrial Average remained almost unchanged.
On Monday, US indexes fell to the lowest point in 2 months. The yield of 10-year US Treasury bonds remained above 3%, while the US dollar index hovered at the 5-week high. Traders are once again bracing for hawkish comments by the Fed chairman Jerome Powell at the meeting in Jackson Hole. The recent comments by Fed policymakers have put many investors on edge - they stated that the Federal Reserve would continue to tighten its monetary policy aggresively even during an economic slowdown. However, some analysts believe Powell's remarks could be more dovish than expected, which would catch traders off-guard and trigger a new stock market rally.
However, there is little reason for optimism, even if Powell adopts a softer stance on interest rates. As recession looms on the horizon, the glimmers of economic hope are shaky.
Energy stocks advanced as crude oil prices went up amid rumors that OPEC+ member states could decrease production. Natural gas prices in the EU continue to fluctuate as more and more signs of economic damage caused by spiraling energy prices are emerging. Pressure is mounting on EU politicians demanding to resolve the crisis, as winter is only months away. Gazprom has announced that it would stop deliveries via the Nord Stream pipeline for maintenance for 3 days starting on August 31. The halt has sparked renewed concerns that Russian gas exports via the pipeline could not resume afterwards.
The eurozone PMI data poses similar challenges to the European Central Bank as the ones faced by the Federal Reserve. Negative US manufacturing and services PMI data could increase the pressure on the stock markets. Any decisions in the foreseeable future would be quite difficult.
On the technical side, the S&P 500 broke below the closest support at $4,150. The next key level for bears is $4,116. A breakout below this level would open the way towards $4,090, where pressure on the instrument could ease as the index would approach several strong support levels. It would not be easy for the S&P 500 to break through these levels, as bullish traders remain quite active in the market. The index would have to regain the broken support at $4,150 to begin an uptrend. It would open the way toward $4,180 and $4,208, as well as $4,229, where bearish players would return to the market. Furthermore, some traders would take profit from their long positions. The next target for the index would be further away at $4,255.