Where next for US SP500
The S&P shed 20% across the previous quarter, with the vast majority of those losses being accrued in the last six weeks of the quarter. Losses stacked up as coronavirus outbreak spread beyond China’s borders into Europe and the US. The S&P’s 11-year bull market came to a crashing end.
The S&P did pick up off its recent low of 2184 following unlimited QE from the Fed and a $2 trillion rescue package from the senate. However, the advance has stalled as the very measures being implemented to stop the spread of the virus are causing demand for goods and services to evaporate. Business are struggling and staff are being laid off to cut costs.
Coronavirus fears are starting to turn into figures. President Trump warned that between 11,000 – 240,000 Americans could die as a result of coronavirus, despite social distancing measures and in some cases complete lock down restricting the spread of coronavirus
Data is going to be awful, that much we know. A large dose of negativity is priced in. The question is whether the data will be worse than expected or not? The initial jobless claims were shockingly dreadful, more numbers like that will scare the market. Once figures start showing signs of stabilising or even rebounding, the S&P could move meaningfully higher. However, given that the US is only just at the start of a “very, very painful two weeks” we could be some way away from here.
2. Coronavirus numbers
The market is watching these like a hawk. The speed at which coronavirus cases and the death toll accelerates is driving market sentiment. Whilst Spain hs recorded its largest number of daily deaths, Italy’s death toll has peaked. The US is still very much at the beginning of the curve. A steeper curve means longer and more intense public restrictions which is worse news for the economy. The worst is yet to come here.
We’ve been so fixated on coronavirus, that earning season has suddenly crept up on us. Q1 earning season will begin. Needless to say, that the global pandemic is the biggest cloud over earnings season. Whilst Q1 could see a negative impact on earnings, investors will also be watching what the outlooks for Q2 is. So far, companies have struggled to quantify the expected impact of coronavirus, maybe this will have changed by the second half of the month?
Levels to watch
After picking up from March 23rd lows of 2184, the S&P rallied 20% to a high of 2646. The price is consolidating between 2646 and around 2442. It could be worth waiting for a break out off these levels for clues over future price action.
StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.
For further details see our full non-independent research disclaimer and quarterly summary.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.
City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.
City Index is a trademark of StoneX Financial Ltd.
The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.
© City Index 2024