S&P500 Forecast: S&P500 inches lower in a subdued start & after Moody's downgrade

Congress building
Fiona Cincotta
By :  ,  Senior Market Analyst

US futures

Dow futures -0.08% at 34252

S&P futures -0.15% at 4408

Nasdaq futures -0.17% at 15499

In Europe

FTSE +0.57% at 7401

Dax +0.32% at 15286

  • Moody's downwardly revised US credit outlook to negative
  • The mood is subdued ahead of tomorrow’s inflation data
  • Oil steadies after last week’s losses 

Moody’s downwardly revised the US credit outlook

US stocks are set for a subdued start to trading on Monday after Moody's decision to downgrade its US credit rating outlook poured cold water on last week's optimism and as investors opt to stay on the sidelines ahead of tomorrow’s inflation data.

U.S. equity indices had closed significantly higher on Friday, boosted by rebounding tech and growth stocks as treasury yields calmed. The Nasdaq100 posted its biggest one-day rise since late May and rallied 2.4% across the week. Meanwhile, the S&P rose 1.3%, and the Dow Jones 0.7%.

After the close on Friday, Moody's announced that it changed the outlook on the U.S. government credit rating to negative from stable while also confirming its Aaa long-term rating.

Attention is also turning to US inflation data on Tuesday, which could provide further clues over whether the Federal Reserve will likely raise interest rates again. Expectations are for inflation to rise 0.1% MoM and 3.3% annually, down from 3.7% in September.

The data comes after Federal Reserve policymakers, including Fed chair Jerome Powell, said last week that the fight against inflation may not be over and another rate hike was still possible.

Earnings season is coming to an end. However, this week sees the release of several big box retailers, which could provide some clues about what to expect from the all-important holiday shopping season.

Corporate news

This pre-market after the Emirates announced a $52 billion order for 95 Boeing aircrafts. This comes after both Boeing and Airbus have highlighted the Middle East region as a major source of demand in the coming years. China may also reportedly resume buying Boeing 737 Max aircraft, with an announcement possible later this week.

HP rises after Citigroup upgraded the computer hardware manufacturer to buy from neutral, citing cost reductions and the potential for AI integration on PCs.

Tyson Foods falls after announcing that it will close two of its case-ready meat production facilities in the US.

S&P500 forecast – technical analysis

The S&P500  has extended its rebound from 4100, the October low, rising above the 200 & 50 sma, but has run into resistance around 4400, the round number, 100 sma and falling trendline resistance. The RSI keeps buyers hopeful of further gains. Buyers will look for a rise above 4450, the June high to extend gains to 4540, the September high. Should sellers successfully defend the 4400 level, a move to test the 100 sma at 4335, also last week’s low could be on the cards.

S&P 500 FORECAST CHART

FX markets – USD rises, GBP rises

The USD is increasing, adding to gains across the previous week ahead of tomorrow's inflation figures. CPI data will shed more light on whether the Federal Reserve is likely to hike interest rates again.

EUR/USD is edging lower despite slightly more hawkish comments from ECB governing council member Martin Kazakh, who said it's too soon to say that terminal rates have been reached. His comments came after the euro drifted lower last week with little in the way of fresh catalysts. This week, the eurozone economic calendar is busier with the release of GDP, trade and inflation figures.

GBP/USD Is edging higher after losses last ahead of her busy week for UK data. BoE’s Catherine Mann is due to speak. Her comments come after BoE chief economist Huw Pill and BoE governor Andrew Bailey said that rates must stay high for an extended period to tame sticky inflation. Labour market data is due tomorrow and comes after the CIPD said that public sector pay is expected to rise 5%, the largest increase since the survey began in 2012.

EUR/USD -0.17% at 1.0667

GBP/USD +0.1% at 1.2247

 

Oil holds steady after last week’s losses

Oil prices are holding steady after booking losses across the previous week, amid concerns over falling demand in the US and China combined with mixed signals from the US Federal Reserve.

While oil prices rose 2% on Friday after Iraq vocally supported oil cuts by OPEC, the oil price was still down around 4%, marking its third straight weekly loss, the longest losing run since May.

Weak data from China and a slow demand outlook hit the prices. The EIA forecast that US demand will fall, and per capita US gasoline consumption is expected at this lowest level in two decades.

Markets are trading cautiously ahead of US inflation data tomorrow, which could potentially fuels bets of further interest rate hikes should inflation rise again.

WTI crude trades +0.2% at $77.34

Brent trades +0.17% at $81.43

Looking ahead

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Related tags: US Open USD Oil SPX 500

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