The S&P 500 has gone from seriously oversold to very overbought in just over a month. That’s not to say that US stock indices can’t go up from here. But it does suggest that traders should not be surprised if equities were to correct lower, or at the very least look to consolidate below recent highs.
Source: TN Trader
US stock index futures were sharply lower in early trade this morning. The US 500, NASDAQ and Russell 2000 hit their best levels in over two months earlier in the week, while the Dow briefly rallied to pre-tariff levels from early April. The gains followed news of an unexpected breakthrough in US-China trade talks over the weekend.
Prices gapped higher on Monday following the US-China agreement to slash their respective trade tariffs by 115% for ninety days. But it now feels as if the market is in limbo. There’s still a lack of clarity surrounding the Trump administration’s trade policies and this has created a feeling of uncertainty over the global economic outlook.
All eyes are now focused on talks between the US and other trading partners such as Japan, India and South Korea.
Meanwhile, there are concerns about the extent of damage that may have already been done since President Trump announced his programme of reciprocal tariffs early last month. Yesterday US stock indices ended the session mixed. The Dow closed a touch lower, while the S&P 500 eked out a modest gain. The tech-heavy NASDAQ saw the best of the session, ending up 0.7%. In contrast, the mid-cap, domestically-focused Russell 2000 lost 0.9%.
Investors seem reluctant to push equities up much further. US indices recovered off their lows following the release of better-than-expected wholesale inflation numbers. But Retail Sales were a mixed bag, while weekly jobless claims were dead in line with forecasts. Manufacturing data were also mixed. Meanwhile, in a scheduled speech, Federal Reserve Chair Jerome Powell warned again of ‘…more frequent, and potentially more persistent, supply shocks…’ which could lead to inflation being ‘more volatile’ than in the 2010s.
