S P 500

The trading week is coming to an end, and a phase of weakness remains evident across the S&P 500 in the short term. Recent price action reflects this dynamic, with SPX losing more than 2.00% over the last two trading sessions, bringing selling pressure back into focus.

And just like that, it is Friday again and the end of a volatile week. Today offers little on the macro calendar to change the prevailing narrative, leaving markets largely at the mercy of risk appetite, oil prices and the growing unease around the AI trade.

Price action in both the UAE MSCI and S&P 500 has been consolidating for several months, leaving each market at a key technical juncture. The direction of any breakout could offer insight into the health of UAE and US markets as risk sentiment remains subdued, crude oil prices stay elevated, and major earnings reports and elections approach.

Recent trading sessions have done little to restore confidence in the equity market. Over the last four sessions, the S&P 500 has declined by nearly 1.00%, a move that highlights growing short-term weakness and keeps the index moving further away from its record-high territory.

US and global equity markets have extended Wednesday’s sell-off, with Wall Street opening lower after a weak handover from Asia and Europe. The deterioration in risk appetite has been spreading across global markets. The dollar was firmer, Treasury yields were holding onto yesterday’s gains, while gold, silver and bitcoin were all under pressure alongside equities and major currencies.

A hawkish Fed knocked equities and gold lower for only a few hours, and both recovered their losses before the session was out.

The Fed was quite hawkish yesterday and we saw what kind of a reaction it triggered in the FX and equity markets. Yet despite those initial falls, index futures have already recovered to around their pre-FOMC levels at the time of writing today. The resilience of the stock market continues to surprise.

US equity index futures surrendered an earlier midday bounce in London, as investors struggled to look past an increasingly uncomfortable macro backdrop. Higher oil prices and rising government bond yields are combining to put renewed pressure on risk assets, while the absence of a clear catalyst for improvement makes it difficult to see why investors would materially increase equity exposure at current levels.

The S&P 500 fell on Friday to post a flat close on the week. Rising yields and elevated oil prices reminded investors that the macro backdrop is turning challenging. Friday’s US jobs report raised the pressure on the Fed to hike as the report was considerably stronger than expected. All the attention will be on inflation data in this shortened week for US investors, plus the usual suspects of oil and bond yields, ahead of the FOMC rate decision in the following week.

Recent trading sessions around SPX have failed to show a particularly strong sense of confidence for the equity index. Over the last four trading sessions, average price movements have barely reached 1.00%, a figure that remains below the fluctuations seen weeks ago, when daily moves above 1.5% were relatively common.

Risk appetite has been hurt today with global stocks, gold, bonds and bitcoin all falling. On the ascendency were the usual suspects: Oil and the US dollar amid further escalating tensions between the US and Iran. Stock investors are cementing hawkish Fed expectations to an extent that it is starting to hurt their appetite for risk. Also unnerving investors is the continued rise in global bond yields – which kind of goes hand in hand with oil prices.

The dollar surged across the board after the Fed Chair Kevin Warsh surprised with a hawkish-leaning speech at the Jackson Hole summit. All the bearish dollar bets that had been accumulated since last Friday on the back of data weakness and bond market troubles had to be squared and that triggered a short squeeze rally for the dollar. Gold and silver dropped, as a result, as too did bitcoin, while US indices were giving back earlier gains.