What data say? what do investors expect?
This week started with a darker outlook and more disappointing economic data, which increased the fears of a severe recession. Especially, after Monday's US ISM data, this negative outlook increased.
As fears of recession increase, pressures on central banks to have more tightening policies decrease. This guess and expectation helped the stock markets to gain on Monday and it continued on Tuesday as well, however, it will continue just till we have the full employment report, after that, it depends on labor market data and investors' reaction.
On Monday, the Dow Jones Industrial Average closed by 2.7% gain, SP500 gained 2.6%, and the Nasdaq composite at 10,815.43, raised 2.27%, and today, ahead of the US season and JOLTs report, we can see them rising so far by 1.2%, 1.55%, and 2.0% respectively in the futures market, as retreating US Treasury yields bolstered demand for stocks.
A day after the ISM report showing weaker-than-expected manufacturing activities raised hopes among market participants that rising rates by FED could slow down, today, job openings and factory orders will be in focus before the US market opens.
On the other hand, in the bigger picture, price pressures are still high and any step back by Fed can erase the hopes. Therefore, I guess the US central bank must press forward.
The stock rebound on the first trading day of the final quarter follows the S&P 500's lowest close in nearly two years on Friday, capping its worst monthly performance since March 2020 on fears the Fed's aggressive rate hikes will cause an economic downturn.
The yield on the 10-year US Treasury slipped to near two-week lows, under 2.6%, while just a week ago was at 15 year high. This dropping in bond yields can help the stocks to raise the future.
From the technical point of view, while in the smaller timeframes we can see the SP500 in a bullish trend, however in the bigger picture it is just a correction. To talk about the uptrend and see the bulls leading the market, we have to see the price above 20-DMA at 3,820 US dollars, and then 4,100.