Today, US stock index futures rose after a missile strike on the Polish border reminded investors that an escalation of the Russian-Ukrainian conflict persists. Right after that, it was stated that Russia had nothing to do with these missiles and that they came from Ukrainian territory and were used for air defense.
Futures contracts on the S&P 500 index added about 0.4% and futures on the Nasdaq 100 index rose by 0.5%. US President Joe Biden said in an interview that the missiles were unlikely to have been launched by Russia. This statement made the yen and US dollar fall as demand for safe-haven assets weakened sharply. Meanwhile, the yield on 10-year Treasury bonds rose.The Associated Press reported that US intelligence indicated that it was Russia that had fired missiles at Poland. But then, as is usually the case, they quickly "changed their minds," quoting unnamed US officials as saying that the initial data indicated that it was Ukrainian air defenses that fired the missiles.
Despite the fact that the situation seems to be resolved, this event emphasizes the existing risks for investors and reminds them that the demand for risky assets may fade at any time.
The US dollar has lost nearly 6% from its peak in late September. Last week, it posted its biggest losses against 10 major currencies for the first time since the 2020 pandemic. Stock indices showed a similar reaction. However, many experts agree that the bear market is not over yet. The rally seen last week has not changed the negative sentiment in the market and the expected recession will still cause many investors to incur losses if they are reckless and invest in stocks and other risky assets now.
The British pound showed almost no reaction to the data showing that annual inflation in the UK jumped to 11.1%. The currency is trading higher against the US dollar. Investors focused on the UK budget to be published tomorrow where a decision on spending cuts and tax hikes is expected to be unveiled. These measures are aimed to fill the hole in public finances.
Yesterday, Donald Trump officially announced that he launched a third bid for the White House, firing the starting gun on the 2024 presidential election cycle.
As for the S&P 500 index, after yesterday's sharp collapse at the end of the day, the market has stabilized a bit. Now bulls need to protect the support level of $3,968. As long as the index is trading above this level, the demand for risky assets may remain. This is likely to strengthen the trading instrument and return the level of $4,003 under control. Following this scenario, the price may reach $4,038. If this level is broken through, the index may start an upward correction with the target located at the resistance of $4,064. The next target is located in the area of $4,091. If the trading instrument declines, bulls will have to show some activity near $3,968. If this level is pierced, the price may be dragged down to $3,942, opening the way to a new support level of $3,905.