Stocks Fluctuate as Powell Signals Cautious Fed Approach

Mixed Sentiments in U.S. Stock Market Ahead of the Weekend

U.S. stock index futures are showing mixed results before the cash market opening on Friday. The S&P 500 and the Dow Jones are heading towards slight weekly losses, while the Nasdaq Composite is set for a modest gain. This comes after a period of significant gains, with Thursday’s session ending the longest winning streaks for the S&P 500 and Nasdaq since 2021.

At 10:01 GMT, the blue chip Dow Jones Industrial Average is at 34009.00, up 65.00 or +0.19%. The benchmark S&P 500 Index is at 4364.75, up 2.50 or +0.06% and the tech-weighted Nasdaq-100 is at 15234.50, down 21.50 or -0.14%.

Rate Hike Cycle and Economic Data

The market’s recent rally was influenced by soft economic data and the perception that the Federal Reserve might be nearing the end of its rate hike cycle. Despite this, recent comments from Fed officials, including Chair Jerome Powell, suggest a more cautious approach, focusing on a data-dependent policy. This has led to varying expectations among traders about future interest rate movements.

Labor Market and Treasury Yields

Recent labor data, indicating stability in the job market, contrasts with the rising Treasury yields. The yields climbed following Powell’s remarks late Thursday and a disappointing auction of 30-year bonds, reflecting a complex economic landscape. Powell emphasized the ongoing challenge of combating inflation, hinting at the possibility of further rate hikes if necessary.

Powell’s Hawkish Stance

Powell’s hawkish tone is a reminder to the market not to become overly optimistic about potential rate cuts. His commitment to controlling inflation, even if it requires maintaining high rates for an extended period, has introduced some caution into the stock market.

Economic Outlook and Central Bank Insights

Investors are now turning their attention to upcoming economic data, including consumer sentiment figures and comments from other Federal Reserve officials, which could provide further insights into the health of the U.S. economy and the central bank’s future policy direction.

Technical Analysis

S&P 500 E-mini futures are currently trading at 4362.25, positioned slightly below the 50-day moving average of 4366.78, indicating a neutral to slightly bearish short-term trend. However, it remains above the 200-day moving average of 4279.87, suggesting that the longer-term trend is still relatively bullish.

The price is hovering just above the minor support level at 4336.00, which could be a pivotal point; a breach below this level could signal a shift towards a bearish sentiment.

On the other hand, the current price is below the minor resistance level of 4424.50, suggesting that there are obstacles to any upward movement. The main resistance at 4494.00 remains a significant barrier for any bullish trend continuation.

Overall, the market sentiment for the S&P 500 E-mini futures appears to be cautiously neutral, leaning towards bearish in the short term, with a need to closely monitor the minor support level for potential trend shifts.