S&P 500 (SPX) flatlines before nonfarm payrolls

Nonfarm payrolls for November arrive on Friday.
PCE data supports the Fed pause theory.
Bond yields price a lower terminal Fed rate below 5%.

Ivan Brian FXStreet

US equities held up well on Thursday with little profit-taking evident. The strong move on Wednesday after Powell's speech was consolidated as the major indices remained nearly flat for most of the session. The NASDAQ correctly outperformed due to the continued fall in interest rates as markets priced in a peak Fed funds rate of about 4.9%, down from 5% only a few weeks ago. This is perhaps curious given Powell and others have stated they see peak rates being higher than the September forecast, but bond markets are betting on a 2023 recession to keep a lid on rate hikes. This naturally boosts the rate-sensitive NASDAQ. The situation in China is helping some of the big tech names, notably Apple (AAPL) and Tesla (TSLA), which overall is helping all indices. Oil prices recovering have pushed oil stocks higher, and the energy sector also stabilized on Thursday after dropping Wednesday.

S&P 500 news

Asian equities fell as profit-taking was evident after some strong rallies this week. All eyes now turn to the nonfarm payrolls release from the US. Expectations are set at 200K jobs, which would add to Fed pause hopes with slowing evident. Anything higher could prove difficult for risk assets to make gains. Overall, a tight balance is evident as too much of a slowdown will add to recession fears after yesterday's weak ISM data. Below 50K would put the reading in the recession zone.

S&P 500 (SPX) forecast

Technically, the S&P 500 remains bullish above 4,030, which is the double top from November. The break above has now added fuel to the rally, and as long as we remain above this level the risk reward is skewed higher in my opinion. Friday, however, is the next hurdle with the jobs report. Extended resistance is to 4,325, the summer high. This would be a strong resistance and a real test if we are in a longer-term bear market.

SPX daily chart

Premium

You have reached your limit of 3 free articles for this month.

Start your subscription and get access to all our original articles.

Subscribe to Premium Sign In

Author

Ivan Brian

FXStreet

Ivan Brian started his career with AIB Bank in corporate finance and then worked for seven years at Baxter. He started as a macro analyst before becoming Head of Research and then CFO.

EUR/USD stays defensive below 1.1900 as USD recovers

EUR/USD trades in negative territory for the third consecutive day, below 1.1900 in the European session on Thursday. A modest rebound in the US Dollar is weighing on the pair, despite an upbeat market mood. Traders keep an eye on the US weekly Initial Jobless Claims data for further trading impetus.

GBP/USD holds above 1.3600 after UK data dump

\GBP/USD moves little while holding above 1.3600 in the European session on Thursday, following the release of the UK Q4 preliminary GDP, which showed a 0.1% growth against a 0.2% increase expected. The UK industrial sector activity deteriorated in Decembert, keeping the downward pressure intact on the Pound Sterling.

Gold sticks to modest intraday losses as reduced March Fed rate cut bets underpin USD

Gold languishes near the lower end of its daily range heading into the European session on Thursday. The precious metal, however, lacks follow-through selling amid mixed cues and currently trades above the $5,050 level, well within striking distance of a nearly two-week low touched the previous day.

Cardano eyes short-term rebound as derivatives sentiment improves

Cardano (ADA) is trading at $0.257 at the time of writing on Thursday, after slipping more than 4% so far this week. Derivatives sentiment improves as ADA’s funding rates turn positive alongside rising long bets among traders.

A tale of two labour markets: Headline strength masks underlying weakness

Undoubtedly, yesterday’s delayed US January jobs report delivered a strong headline – one that surpassed most estimates. However, optimism quickly faded amid sobering benchmark revisions.

Sonic Labs’ vertical integration fuels recovery in S token

Sonic, previously Fantom (FTM), is extending its recovery trade at $0.048 at the time of writing, after rebounding by over 12% the previous day. The recovery thesis’ strengths lie in the optimism surrounding Sonic Labs’ Wednesday announcement to shift to a vertically integrated model, aimed at boosting S token utility.