US open: Stocks rise at the start of a busy week

Congress building
Fiona Cincotta
By :  ,  Market Analyst

US futures

Dow futures +0.40% at 32028

S&P futures +0.31% at 3970

Nasdaq futures +0.25% at 12420

In Europe

FTSE +0.11% at 7290

Dax +0.18% at 13298

Euro Stoxx +0.34% at 3610 

Stocks rise, paring earlier losses

US stocks are heading for a positive start to the week, rebounding from losses on Friday as investors turn their attention to earnings, which are set to ramp up this week. Earnings optimism is overshadowing recession fears that dragged stocks lower on Friday.

The FOMC rate decision, along with earnings from the likes of Apple, Amazon, and Alphabet, will shed more light on the outlook for the US economy.

While stocks are rising today, the upside is likely to be limited until either economic data, particularly inflation, shows a bottoming out or the Fed starts to adopt a notably less hawkish stance. Neither of these is likely this week, meaning that we will likely see a bear market rally rather than a more serious fundamental shift in the market.

In corporate news:

Tesla trades over 1% higher pre-market after the EV maker’s securities filing shows that the company logged a $64 million gain from its Bitcoin sales in the first six months of the year.

Snap fell 2.2%, extending the 39% slide on Friday after its quarterly results disappointed. A downgrade from Morgan Stanley to underweight prompted today’s selloff.

Where next for the S&P500?

The S&P500 is extending its rebound from the 2022 low of 3635. The rise above its 20 & 509 sma, resistance at 3950, and the bullish RSI keep buyers optimistic about further upside. Buyers will need to rise over resistance at 4100, the May 16 high, to extend gains towards 4200, the May 31 high. On the flip side, failure to hold over 3950 could open the door to 3860, the confluence of the 20 sma, and the falling trendline support, which could be a tough nut to crack. A fall below 3730 could create a lower low.

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FX markets – USD eases lower, EUR rises.

USD is falling as the market mood improves and investors shrug off recession fears. The USD fell across the previous week as recession fears prompted investors to scale back hawkish Fed bets.

EURUSD is rising as investors look past data from the IFO, which says that Germany is on the brink of recession. German business morale fell by more than expected to 88 in July, owing to surging energy prices and lingering concerns over gas shortages. This was down from 92.8 in June.

GBP/USD is rising despite data from the Confederation of British Industry showing that industrial output grew at the lowest level in over a year in the three months to July. The industrial trends survey fell to +6 in July from +19.

GBP/USD  +0.5% at 1.2070

EUR/USD  +0.2% at 1.0235

Oil rises after falling last week

Oil prices have seen a choppy start to the week, falling in early trade before recovering those losses and pushing modestly higher. The market is seesawing as investors continue to weigh up supply concerns and worries over future demand ahead of the FOMC rate decision.

Aggressive tightening by the Federal Reserve could slow economic growth further, which would see demand slip lower. PMI data on Friday already highlighted contracting economic conditions. Given the macroeconomic backdrop of slowing economic growth, any moves higher in oil are likely to be limited.

That said, supply constraints remain owing to Western sanctions on Russia. Libya’s output also remains volatile as political tensions in the region remain. The Libyan National Oil Corporation aims to bring oil output back up to 1.2 million bpd across the coming two weeks.

WTI crude trades +1% at $95.20

Brent trades +0.6% at $99.70 

Looking ahead

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Related tags: Trade Ideas SPX 500 USD Oil

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