On Friday, US stock index futures rose, as did European markets, as investors recovered slightly from February's turmoil caused by a strong US economy and the risk of further inflation. The bond market also stopped falling.
Europe's main index rose by 0.6% and returned to a one-week high. The S&P 500 index futures jumped by 0.3% and the NASDAQ index added 0.4%. Asian markets rose about 1% thanks to gains in Hong Kong and Tokyo.
Investors are optimistic after the turmoil. The market has accepted high rates, the reporting season is over, and March may become the month when traders will start buying cheaper assets again. However, that does not mean that the bull market will start. It is difficult to determine how aggressive the Fed's policy will be next.
Now, stock markets are positive about growth forecasts. That means they will do better with the prospect of an additional 50 basis points than expected. The rise in US Treasury yields also halted today, with the 10-year benchmark down five basis points and back to 4%.
Yesterday's data proved that the labor market is still resilient. Thus, the Fed will continue to tighten its monetary policy, and today's ISM Services PMI may also lead to a market correction.
According to Bank of America, citing EPFR Global data, about $68 billion went into mutual funds in the week ending on March 1, indicating investors are positioning and preparing for the bull run. However, most investors believe that the Fed may have to raise interest rates a lot more, which is why yields are rising so much in the bond market. The swap markets are currently pricing in the Fed's rate hike in September at 5.5%, and some traders are even betting on a 6% increase.
Yesterday, after the US market closed, Federal Reserve Governor Christopher Waller said he would support raising interest rates even more than his current forecast if economic indicators continue to be higher than expected.
Meanwhile, bitcoin fell to its lowest level in more than two weeks due to a broader drop in the cryptocurrency market.
Oil posted its first weekly gain in three weeks as optimism about China's recovery offset lingering concerns about US monetary policy tightening. Gold rose and was poised for its best week since mid-January.
As for the S&P 500 index, the pressure on risky assets has eased. The index can recover only if bulls manage to get back above $3,980 today, trying to drag the price higher to $4,010 and $4,038. In addition, bulls need to take control of control $4,064, which will cancel the bear market. After that, we can expect a more confident rush to $4,091. If the index declines amid strong US ISM Services PMI data and lack of demand, bulls will have to protect both $3,960 and $3,923. Breaking through these levels, the S&P 500 index may plummet to $3,890 and $3,866.