S&P 500 Forecast: SPX rises after selloff, but remains on track for a weekly decline

US futures        

Dow futures 0.45%, S&P futures 0.3%  & Nasdaq futures  0.25%

European futures

FTSE 0.45%,  DAX  0.45%

• US stocks rebound from yesterday’s selloff
• Yields extend gains despite Treasury Department's intervention
• Jackson Hole Symposium next week
• Oil rises 5% this week, a second weekly rise

U.S. Stocks Set to Rise as Treasury Yields Remain Elevated

U.S. stocks are set to open higher on Friday after falling sharply in the previous session. However, the major indices remain on track for weekly losses as investors continue to weigh rising government bond yields and oil prices against a resilient earnings backdrop.

Treasury yields have been one of the biggest drivers of markets this week. Long-dated yields jumped again yesterday as investors became increasingly concerned about the size of U.S. government debt, persistent inflation risks and the longer-term fiscal outlook.

The move came despite Treasury Secretary Scott Bessant saying on Thursday that the government could increase its Treasury buybacks further, following the surprise intervention earlier in the week.

The fact that yields have remained close to their recent highs despite these measures is important.

It suggests that the Treasury's intervention can provide some short-term relief, but is unlikely to solve the underlying problem while oil prices remain elevated and U.S. government debt has crossed $40 trillion.

In other words, the market appears to be looking beyond the intervention and focusing instead on the structural pressure on U.S. borrowing costs.

Attention will now turn to next week's Jackson Hole Symposium, where Federal Reserve Chair Kevin Warsh is due to speak on Friday.

His comments will be closely watched, particularly with markets currently pricing in a 65% probability that the Fed leaves rates unchanged in September.

That relatively low conviction leaves markets vulnerable to a sharp move if Warsh provides a clearer signal on the direction of monetary policy.

U.S. core PCE inflation will also be in focus.

Corporate Movers

Crypto-related stocks are rising firmly on Friday as Bitcoin heads for a weekly gain of around 20%, which would be its strongest weekly performance in two and a half years. Robinhood, Coinbase and Strategy are all up around 4.5%, helped by the crypto rally, optimism surrounding regulation and a weaker U.S. dollar.

Broadcom is rising more than 1% following reports that the semiconductor manufacturer is planning to raise more than $60 billion in debt to support a deal involving Anthropic.

Ross Stores is up 8% pre-market after the retailer reported Q2 results that beat expectations and issued stronger-than-expected third-quarter earnings guidance.

S&P 500 Forecast – Technical Analysis

The S&P 500 remains above its rising trend line and the 50, 100 and 200 EMAs, keeping the broader trend constructive. The index ran into resistance at the record high of 7,770 before easing back below 7,700. Despite the pullback, the broader uptrend remains intact.

Immediate support is seen at 7,620, the June 26 high, followed by 7,560, where the falling trend line and 50 EMA converge.

A break below this area would weaken the near-term outlook, although it would take a move below 7,300 to create a lower low and change the broader structure.

On the upside, buyers will look to reclaim 7,700 and break above 7,770 to create a fresh record high, bringing 7,900 and 8,000 into focus.

FX Markets – Dollar falls, EUR/USD rises

The U.S. dollar is holding near a three-month low after a series of Treasury announcements aimed at containing long-term borrowing costs, while concerns over the U.S. fiscal outlook have also weighed on the greenback.

Attention will now turn to next week's Jackson Hole Symposium, particularly as markets remain uncertain over whether the Fed will hike rates in September.

EUR/USD is rising towards a three-month high amid dollar weakness. Eurozone data has also provided some support, with business activity continuing to expand in August. Manufacturing improved, particularly in Germany, although services growth remained modest.

Eurozone consumers also lowered their inflation expectations to 2.9% from 3%.

However, inflation remains above the ECB's 2% target, keeping expectations for a September rate hike intact.

GBP/USD is rising on Friday and is on track for its fourth consecutive weekly gain, helped by dollar weakness despite mixed UK data.

UK retail sales fell in July, in line with expectations, following a sharp increase in June. Meanwhile, the UK government recorded an unexpected £1.8 billion budget deficit in July as spending increased, highlighting the pressure on the UK's fiscal position.

The latest PMI data was more encouraging, however, with services activity accelerating.

Oil rises 5% this week on supply concerns

Oil prices are heading higher on Friday and are on track for a weekly gain of around 5%, which would be the second consecutive weekly increase.

The move comes as President Trump threatens tougher sanctions on Iran and tensions remain elevated.

While sanctions may not immediately reduce oil supply further, supply is already heavily restricted because of the disruption around the Strait of Hormuz.

The market therefore remains focused on the extent and duration of the supply disruption.

With little sign of a diplomatic breakthrough and traffic through the Strait still severely restricted, the risks remain skewed towards higher oil prices. A meaningful improvement in U.S.-Iran relations would be needed to remove some of the current risk premium.