S&P 500 Forecast: SPX rises on signs of the jobs market cooling

Congress building
Fiona Cincotta
By :  ,  Senior Market Analyst

US futures

Dow futures +0.34% at 38761

S&P futures +0.43% at 5126

Nasdaq futures +0.6% at 18117

In Europe

FTSE +0.53% at 7693

Dax +0.04% at 17796

  • Stocks extend gains ahead of Powell’s second testimony
  • US initial jobless claims rise by more than forecast
  • EUR/USD falls after ECB leaves rates on hold
  • Oil inches lower on worries over higher rates for longer

Jobless claims are higher than expected

U.S. stocks are heading higher, extending gains from the previous session as investors weigh up the latest labor market figures and look ahead to Jerome Powell’s second day of testimony before Congress.

Yesterday, Powell’s testimony to Congress on Wednesday added to optimism that the US central bank would eventually cut interest rates this year. However, he also reiterated that policymakers want more evidence that inflation was cooling towards the central bank's 2% target before cutting rates.

Meanwhile, Minneapolis Fed president Neel Kashkari said that he did not expect the Fed to cut rates more than twice this year owing to the resilience of the US economy, which could keep inflation sticky, giving the Fed more reason to keep interest rates higher.

His comments align with those of other Fed officials in recent weeks who have said that persistent inflation could mean that early rate cuts are looking less likely, which could limit the upside in stocks for now.

Still, signs that the US labour market could be cooling have helped to boost the market. US jobless claims increased by 217,000, slightly ahead of the 215,000 forecasts, indicating a subtle softening in the jobs market. The data comes after USA job openings fell 26,000 in January amid signs that the labor market could be easing and after the ADP payroll rose by less than forecast.

The figures come ahead of Friday's crucial non-farm payroll release, which could offer further clues about the US economy's health and the labor market's resilience.

Corporate news

Novo Nordisk is set to rise 5% on the open after the pharmaceutical giant unveiled data for its obesity drug that suggested it was more effective than its Wegovy therapy.

Victoria's Secret slumped 30% after the retailer unveiled soft guidance amid waning apparel demand.

Nordstrom is set to open 1% lower after Jefferies downgraded its stance on the department store chain, as full-price sales continued to underwhelm.

Market Outlook Indices

S&P 500 forecast – technical analysis.

After hitting an all time high of 5149, the S&P 500 is consolidating just below here. It continues to trade within its rising channel dating back to late October, although the RSI bearish deviation could suggest that further gains are unlikely. Still, bulls are likely to remain in control while the price holds above 5050. Below here, support can be seen at 5000 the psychological level. Meanwhile, buyers will look for a rise over 5149 to extend gains to fresh all time highs.


FX markets – USD falls, EUR/USD falls

The US dollar is falling for a fifth straight day, partly owing to increased flows into the Japanese yen and as investors digest Federal Reserve chair Jerome Powell's testimony before Congress. Powell said it would likely be appropriate to dial back interest rates at some point this year. Powell is due to speak again shortly.

EUR/USD is falling after the ECB left interest rates unchanged at the record 4% level in line with expectations. However, the ECB downwardly revised its inflation forecast, suggesting it could arrive at the 2% target sooner.

GBP/USD is rising for a fifth straight day as the market continues to digest the Chancellor's Budget, where he announced the 2% cut to the National Insurance tax. The OBR upwardly revised growth forecasts, meaning that the recession that the UK tipped into at the end of last year will likely be short-lived.

Oil falls on rate cut jitters

Oil prices are edging lower on Thursday as expectations that the US interest rate cuts could be delayed overshadowed upbeat Chinese trade data.

After Federal Reserve chair Jerome Powell's testimony before Congress and following hawkish comments from Neil Kashkari, there are rising concerns that the Federal Reserve may delay its first interest rate cut into the second half of the year, which could hurt the outlook for oil demand.

These concerns overshadowed news that China's imports and export growth beat forecasts, suggesting a downturn in global trade could have bottomed out.

China posted a 5.1% rise in oil imports in the first two months of this year as crude purchases ramped up to meet higher fuel sales during the Lunar New Year holiday.

Meanwhile, crude oil inventory data showed that stockpiles rose for a sixth straight week, building by 1.4 million barrels, smaller than the 2.1 million barrel rise that analysts' forecast.

Related tags: US Open USD SPX 500 Oil

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