Just after the US Open, the S&P 500 hit a new low for the year, just over the 4100 mark but turned back around 50 points higher, following a volatile month so far. Index futures are trading near 4150, up about 0.6%, with investors focusing on several key risk events, including the Fed meeting on Wednesday and the US jobs report in April.
In spite of Monday’s rebound from yearly lows, few investors expect the recovery to continue to levels around 4400 in mid-April. According to reports, the Fed plans to raise rates by 50 basis points this week and at least another 50 basis points at upcoming meetings to bring rates back to around 2.50% by the end of the year to curb inflation. The Fed is also expected to announce its quantitative tightening plans this week.
The yield on US long-dated bonds is rising again in advance, with the 10-year bond expected to rise above 3.0% for the first time since late 2018. This trend will present a challenging environment if it continues this week. Most large-cap tech and growth stocks are enjoying a rising price-to-earnings environment.
The Fed’s tightening policy should not be the only concern for investors. Earlier in the week, the official April PMI data from China was released. It came in below expectations, while the disappointing ISM US manufacturing PMI data didn’t help the situation. In addition to the overall index dropping to its lowest level since 2020, the supplier deliveries sub-index reached a five-month high, reflecting longer delivery times due to the war in Ukraine and China’s lockdown, which are negatively impacting global supply chains.
The latest index also indicates that firms struggled to hire/retain workers in April, indicating that while indicators of labor market sluggishness from Friday’s official jobs report remain resilient, overall NFPs are weak.
On Monday, the high-tech Nasdaq 100 index was up about 0.6%, although it also hit new yearly lows and is still unable to clear the 13,000 mark, more than 2.5% above last year’s lows.
S&P 500 technical analysis:
The S&P 500 index lies below the 20-period SMA on the 4-hour chart. Moreover, the index forms a bearish pin bar candle, indicating further losses.
