S&P 500 Forecast: SPX rises, chip stocks recover, Middle East uncertainty remains

US futures        

Dow futures 0.25%, S&P futures 0.45%  & Nasdaq futures 1.4%

European futures

FTSE -0.05%,  DAX 0.12%

• US stocks rise after losses yesterday
• Chip stocks globally rebound from recent weakness
• US earnings ramp up this week
• Oil swings amid uncertainty over the Middle East

U.S. Stocks Open Higher as Chip Stocks Rebound

U.S. stocks are rising on Tuesday, recovering from yesterday's weakness as chip stocks rebound and investors look through the latest Middle East developments to focus on corporate earnings.

Tech stocks are leading gains, with the Nasdaq up over 1% and the semiconductor sector rising more than 3%. The move follows strength in chip stocks across South Korea, Japan and China overnight.

Earnings from SK Hynix, Alphabet and Intel later this week could provide clearer direction for tech stocks, which have yo-yoed in recent weeks as investors question whether AI-related spending can continue at its current pace.

Meanwhile, the Middle East remains a key source of uncertainty for markets. While hopes of a diplomatic path between the U.S. and Iran initially pushed oil prices lower, those losses have since been pared amid concerns that Yemen's Houthis could target Saudi shipping through the Red Sea.

The conflict continues to cloud the inflation outlook. While recent inflation data has been encouraging, higher oil prices could quickly reverse that progress and keep the Federal Reserve on a more hawkish path.

Corporate Movers

General Motors is rising 1% in pre-market trading after reporting EPS of $3.57 on revenue of $48.03 billion, ahead of forecasts for $3.20 per share on $47.01 billion in revenue.

Domino's is down 1% after reporting earnings of $4.07 per share, below expectations of $4.17. Revenue came in slightly ahead of forecasts at $1.19 billion, versus expectations of $1.18 billion.

Nebius Group is rising 6% after Nvidia disclosed a 9.3% stake in the Amsterdam-based AI cloud company, highlighting growing investor interest in AI infrastructure providers.

S&P 500 Forecast – Technical Analysis

The S&P 500 continues to trade above its rising trendline and the 50-day EMA. The index recently ran into resistance around 7,575 before pulling back to test the rising trendline, where buyers have stepped back in. However, momentum appears to be fading.

Should the trendline and the 50-day EMA continue to hold, buyers will look to retest 7,575, the July high. A move above here brings 7,620 and fresh record highs into focus.

A break below the rising trendline and the 50-day EMA opens the door to support at 7,340. Below there, attention turns to 7,225, the June low.

FX Markets – Dollar Steady, GBP/USD falls

The U.S. dollar is broadly steady on Tuesday as markets balance Middle East developments against optimism following softer U.S. inflation data earlier in the month.

A lack of clarity over the conflict is leaving the dollar in limbo, with investors reluctant to take strong positions.

Markets are pricing a 63% chance of a Fed rate hike at the September meeting and a 90% chance of another move before the end of the year.

EUR/USD is little changed ahead of this week's ECB rate decision. The euro has largely shrugged off a sharp improvement in German investor sentiment, with the ZEW Economic Sentiment Index jumping to 26.3 from 10.5 in June. The stronger reading points to improving confidence in the eurozone's largest economy.

GBP/USD is edging lower on PM Burnham’s second day and following the appointment of John Healey as UK Finance Minister. Investors are nervous after Andy Burnham's comments on fiscal flexibility which unsettled markets yesterday. Separately, government borrowing came in higher than expected, underlining the fiscal challenges facing the incoming government. UK labour market data also pointed to a steabilising, as unemployment remained unchanged at 4.9%.

Oil Firms as Supply Risks Persist

Oil prices are rising on Tuesday, with WTI trading back above $83 per barrel after recovering from earlier losses as traders continue to assess developments in the Middle East.

Reports that the U.S. and Iran could move towards a ceasefire initially pushed prices lower. However, those losses have since been pared.

Tensions remain elevated after the U.S. carried out a 10th consecutive day of strikes following the deaths of two American soldiers.

At the same time, hopes for de-escalation persist after Iran confirmed it had received mediation proposals.

Adding to supply concerns, Yemen's Houthi movement has threatened to block Saudi shipping through the Red Sea. Any disruption to maritime traffic could quickly push oil prices higher.