S&P500 Forecast :S&P500 steady as jobless claims support dovish Fed narrative

US futures

Dow futures -0.05% at 34915

S&P futures -0.03% at 4474

Nasdaq futures -0.05% at 15893

In Europe

FTSE +0.87% at 7441

Dax +0.32% at 15712

• US jobless claims rise to 231k from 218k
• Continuous claims rise for an 8^th straight week
• Macy’s jumps, Walmart slumps post earnings
• Oil falls for a third day 

Jobless claims rise as the labour market cools

US stocks are heading for a muted start as investors digest the latest jobless claims data and look ahead to a series of Fed speakers due to speak later today.

US jobless claims rose by more than expected, by 231k, up from 218K in the previous week and well ahead of forecasts of 220k forecast.

Meanwhile, continuous claims rose by 1865K, up from 1833K and well ahead of forecasts of 1847K. Continuous claims have increased for an eighth week, indicating that the Americans who are unemployed are finding it harder to get a job.

The data suggests a slight weakening in the US labour market, which goes hand in hand with an economy starting to slow after the Fed's aggressive rate-hiking cycle.

However, there is still optimism that the US economy is on track for a soft landing. Data is weakening slightly but not sufficiently to cause any alarm. The markets are still in that phase where bad data is seen as good news as it brings a Fed rate cut closer. U.S. Treasury yields have fallen following the release of the jobless claims data.

The data comes after inflation figures earlier in the week cooled by more than expected, and retail sales data yesterday fell for the first time in seven months but came in above forecasts at 0.1%, highlighting the resilience of US consumers.

The market is convinced that the Fed will not raise interest rates again and could cut rates as soon as Q2 next year.

In addition to economic data, markets are also digesting running over a meeting between President Biden and XI Jinping, which resulted in some small wins and promises of better ties.

Corporate news

Alibaba is falling pre-market after announcing that it will not proceed with a full spin-off of its key cloud unit. Alibaba cites the impact of US controls on exports of chips and semiconductor manufacturing equipment to China. The announcement comes as the company posted Q2 adjusted earnings of 49.24 billion yuan and an 8.5% rise in revenue.

Walmart falls premarket after soft guidance offsets an earnings beat. The retailer posted Q3 EPS of $1.53 ahead of the $1.52 forecast. Revenue rose 5.2% to $160.8 billion, up from $152.8 billion, and ahead of forecasts, same-store sales rose 4.9%. However, a cautious outlook pulled the share price lower.

Cisco has plunged 10% premarket after the tech company slashed its full-year revenue and profit forecasts on signs of slowing demand for its networking equipment.

Macy's has jumped 9.8% after the department store posted a big Q3 profit beat helped by stronger margins. It also raised its full year outlook.

S&P500 forecast – technical analysis

The S&P500 is consolidating at 4500 after a rapid rebound from the 50 sma. The long upper wick on yesterday’s candle suggests little demand at the higher price. Buyers will look to rise above 4525, yesterday’s high, and 4540, the September high, to attack 4600. Support can be seen at 4450 ahead of 4410, the 100 sma, and falling trendline support.

FX markets – USD falls, EUR rises

The USD is falling after US jobless claims data fueled expectations that the Fed is done hiking interest rates.

EUR/USD is rising on a weaker USD and despite comments from ECB president Christine Lagarde, who noted that the higher borrowing costs are hurting banks' profits. Her comments come after the European Commission downwardly revised economic growth to 0.6% in 2023 and 1.4% in 2024.

GBP/USD is rising on USD weakness and recovering from yesterday’s selloff after weaker-than-expected inflation data. The market is increasingly convinced that the Bank of England's next move will be an interest rate cut that could happen as soon as next year.  Bank of England policymaker Megan Greene said that borrowing costs must remain higher for longer to control inflation. Highlighting wage growth, which he said was still incredibly high.

EUR/USD +0.97% at 1.0795

GBP/USD +1% at 1.24

Oil falls for a third day

Oil price is heading lower after stronger-than-expected U.S. oil inventory data amid and mixed demand signals.

The US Energy Information administration's latest inventory data showed that crude oil stockpiles rose by 3.6 million barrels last week, which was twice what analysts had forecasted. The data comes as figures also showed that China's oil refinery throughput fell back in October as industrial demand weakened.

Meanwhile, optimism surrounding inflation and hopes of a soft landing for the US, the world's largest consumer of oil, is helping to support the demand outlook. Data this week from US with inflation cooling and retail sales showing resilience, suggests that the economy could be on track to avoid a recession.

WTI crude trades -1.7% at $77.65

Brent trades -1.7% at $81.85

Looking ahead

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