S&P500 Forecast: Stocks rise after last week's losses

US futures

Dow futures +0.60% at 32616

S&P futures +0.6% at 4142

Nasdaq futures +0.68% at 14275

In Europe

FTSE +0.76% at 7350

Dax +0.30% at 14750

• Stocks recover but are set to book a 3^rd straight losing month
• Earnings & the Fed are in focus this week
• McDonalds rises as Q3 earnings beats forecasts
• Oil falls as Middle East worries ease.

Stocks recover but are set to book a 3rd straight losing month

U.S. stocks are pointing to a higher open on Monday after a challenging week last week and as investors brace themselves for more corporate earnings and an interest rate decision from the Federal Reserve.

The S&P500 fell by 2.5% last week into correction territory, which is measured by a 10% fall from its recent high. The index is on track for its 3rd straight monthly decline, which would be the longest losing streak since the pandemic era in 2020.

Last week, U.S. treasury yields jumped above 5% for the first time in 16 years but have since eased to 4.89% where they are currently. The rise in yields came as the markets worried that a resilient U S economy would mean the Federal Reserve would keep interest rates higher for longer.

The Fed's rate decision is due on Wednesday, and the majority are betting that the Fed has ended the rate hiking cycle as high yields do some of the heavy lifting for the US central bank, tightening financial conditions. However, the market is still pricing in around a 30% probability of another rate hike in December.

The U.S. economic calendar is quiet on Monday, with just the Dallas manufacturing index, which is expected to improve to -15 from -18.1. Looking ahead across the week, US nonfarm payrolls will be in focus and are expected to show job growth moderated in September, although unemployment is set to remain unchanged.

Earnings will remain in focus. After big tech names such as Alphabet and Amazon reported last week this week, the focus will be on Apple, the world's largest company, which is set to release Q4 numbers after the bell on Thursday.

Corporate news

McDonald's is set to open higher after posting stronger-than-expected sales. The fast-food chain posted an 8.1% rise in same-store sales thanks mainly to rising prices. It also raised its quarterly cash dividend by 10%.

HSBC ADRs are set to rise after the banking giant unveiled a $3 billion share buyback after reporting a pre-tax profit of $7.7 billion up from $4.5 billion in the same period a year earlier.

S&P500 forecast – technical analysis.

The S&P500 fell below the falling trendline support to a low of 4100 last week, the level that sellers need to take out to extend the bearish trend towards 4000. The RSI below 50 and the 50 sma appearing to head towards a death cross with the 200 sma could keep sellers hopeful of further losses. Buyers will look to rise above 4180, the falling trendline, to test resistance at the 4200, the round number.

FX markets –USD falls, EUR rises

The USD is edging lower at the start of the week after gains across the previous week amid an improving market mood and despite U.S. treasury yields inching mildly higher.

EUR/USD is rising after data showed that the German economy contracted by less than expected in Q3, shrinking 0.1% after an upwardly revised 0.1% growth in Q2. This was also ahead of the 0.3% contraction forecast. Even so, the data still shows that Germany remains the sick man of Europe. Attention now turns to German inflation data, which is expected to show inflation cooled to 4% from 4.5%. This is still double the ECB's target and raises concerns about stagflation in the region.

GBP/USD is rising against a weaker US dollar as investors digest the latest mortgage approvals data and look ahead to the BoE interest rate decision later this week. UK mortgage approvals fell in September to the lowest level since the start of the year as the Bank of England's interest rate hikes hit lending. Approvals fell to 43,300 last month, down from 45,400 in August. The Bank of England will meet on Thursday and may not hike interest rates further.

EUR/USD +0.41% at 1.0607

GBP/USD +0.17% at 1.2140

 

Oil falls as Middle East worries ease

Oil prices have fallen more than 1% at the start of the new trading week as concerns over the Israel-Hamas war impacting supply from the Middle East have eased and as the market looks cautiously ahead to the Federal Reserve's interest rate decision on Wednesday.

Crude oil prices dropped 3% on Friday as Israel readied for a ground assault into Gaza, raising concerns that the conflict in the region could broaden out by drawing in oil-rich nations. Despite Israel expanding its Gaza assault, the lack of validation that the conflict is spreading has helped oil prices fall lower. Middle East developments are likely to remain a key driver for oil prices.

Attention is now turning to the Federal Reserve meeting on Wednesday. It could provide further clues as the weather US Central Bank will keep interest rates on hold until the end of the year. A less hawkish-sounding Fed could be good news for the oil demand outlook.

WTI crude trades -1.3% at $84.09

Brent trades -1.3% at $88.14

Looking ahead

14:30 Dallas Fed Manufacturing Index