Original article by Matt Weller, FOREX.com
Source: https://www.forex.com/en/news-and-analysis/sandp-500-and-dow-jones-mixed-as-asx-200-eyes-near-term-downside/
S&P 500 and Dow Jones Show Mixed Signals as ASX 200 Faces Near-Term Challenges
Global equity markets exhibited a mixed performance at the start of the trading week, with major U.S. indices offering divergent signals while the Australian market faced short-term downside pressures. The shift in investor sentiment was influenced by various geopolitical tensions, economic indicators, and expectations surrounding earnings reports and global monetary policy developments.
U.S. Equity Markets: Divergence in Performance
On Wall Street, the divergence between the S&P 500 and the Dow Jones Industrial Average stood out as a key theme. Despite recent momentum, stock traders showed caution, adhering to a “wait-and-see” approach ahead of potentially impactful economic and earnings-related developments.
Key Developments in U.S. Indices:
– The S&P 500 ended the trading session flat, reflecting indecisive market behavior as investors balanced optimism over strong earnings against concerns regarding inflation and interest rates.
– The Dow Jones Industrial Average edged lower, showing modest weakness as cyclical stocks came under pressure.
– The Nasdaq 100 outperformed its counterparts, buoyed by further gains in major technology stocks such as Apple, Microsoft, and Nvidia.
Supporting Factors for Nasdaq Outperformance:
– Strong anticipation of major AI-related developments created optimism around big tech.
– Investors expected increased capital expenditures in cloud computing and semiconductor infrastructure.
– Momentum carried forward from the prior week, which saw robust earnings reports from several U.S. technology giants.
Capping Further Market Upside:
– Uncertainty around the Federal Reserve’s rate trajectory.
– Rising concerns about inflation pressures heading into the latter half of the year.
– A cautious market stance ahead of more corporate earnings and economic data.
Federal Reserve and Market Expectations
Investors remained sensitive to signals from the U.S. Federal Reserve regarding monetary policy. While rate cuts remain a possibility later in the year, persistent inflation has made the Fed more cautious, avoiding premature easing of monetary conditions.
Monetary Policy Considerations:
– Recent inflation prints have come in above expectations, which may warrant a more data-dependent stance from the Fed.
– Market participants continue to price in two potential rate cuts by year-end, but timing remains uncertain.
– Fed officials, including Chair Jerome Powell, have reiterated a lack of urgency to shift policy until inflation consistently returns to the 2 percent target.
Economic Data Focus for the U.S.:
– Upcoming releases, such as the Consumer Price Index (CPI) and Producer Price Index (PPI), are expected to provide fresh guidance.
– Labor market reports, including initial jobless claims and nonfarm payrolls, will also influence sentiment.
– Corporate earnings, particularly from sectors beyond technology, may offer insight into broader economic health.
Technical Landscape for U.S. Indices
S&P 500 Outlook:
– The S&P 500 continues to test resistance levels around 5,150, showing signs of hesitation.
– Support lies around the 5,050–5,070 zone, an area previously serving as a breakout level.
– A break below this support region could trigger retracements towards 5,000.
– If momentum returns and resistance is broken convincingly, the index could aim for new all-time highs above 5,200.
Dow Jones Industrial Average:
– The Dow remains range-bound, with immediate resistance at approximately 39,000.
– Short-term support sits near 38,400, a level that has consistently attracted buyers.
– Investors are closely watching the index’s ability to sustain higher lows, which would indicate the potential for a bullish breakout.
– Lackluster performance of industrial and consumer discretionary stocks appears to be weighing on the index.
Strength in Big Tech as Broader Market Lags
Sectoral performance played a significant role in the Nasdaq
Explore this further here: USD/JPY trading.