Futures on US stock indexes opened with gains on August 16th, but quickly reversed course and sharply dropped. S&P 500 futures slipped by 0.2%, while the tech-heavy NASDAQ plummeted by 0.3%. Today, the US Federal Reserve will release the minutes of its July policy meeting, which could intensify pressure on the stock market, especially if investors do not find hopeful hints of a softer Fed stance in the coming autumn.
US and European government bonds gained, halting a streak of losses fueled by concerns that interest rates would remain elevated longer than anticipated. The British pound strengthened as inflation in the UK exceeded expectations.
Despite a series of stimulus measures by Chinese authorities, China's economic troubles continue to weigh in the markets. The yuan's exchange rate dropped to its lowest level against the US dollar in 16 years, and the MSCI China stock index erased all its gains following the key Politburo meeting in late July. China's central bank has taken further steps to influence the yuan's value by injecting short-term cash into the financial system. By now, these moves have failed to restore optimism, with market movements suggesting traders are seeking more aggressive support measures.
Currently, there are no catalysts fueling a new wave of growth, evident in investor sentiment, which is gradually pushing them to lock in profits. The Fed's minutes today are unlikely to clarify future policies, potentially adding to the pressure on indices.
10-year US Treasury bonds stood out among government bonds due to rumors of an exaggerated yield spike. Economists note that the current yield offers a favorable entry point for new investors.
The soaring inflation in the UK has solidified market participants' expectations that the Bank of England will continue to raise rates, potentially reaching 6% by March of next year.
In other markets, natural gas futures rose by 10% on Wednesday following a 13% jump on Tuesday. Traders associated the prospects of disruptions with weak demand and high inventory levels in the region. Gold prices also show signs of strengthening.
As for the S&P 500, the demand for the index has yet to return. Bulls have a chance to revive the uptrend, but they need to settle the price above at $4,447 and $4,469. A surge to $4,488 might occur from this level. Bulls also should maintain control above $4,515, reinforcing the bullish market. In the event of a downward movement due to declining risk appetite, bulls will have to protect $4,427. Breaking below this level, the index may return to $4,405 and $4,382.