S&P 500 Rallies After Manufacturing PMI Falls Into Contraction Territory

S&P 500 Gains Ground After Disappointing PMI Reports

S&P 500 gained upside momentum and moved towards the 3800 level as traders reacted to the disappointing PMI reports, which indicated that recession risks increased.

At this point, bad economic news are good news for the stock market. Traders hope that the Fed would be more careful with rate hikes. Interestingly, Treasury yields moved higher today, while the U.S. dollar was mostly flat against a broad basket of currencies. Unlike stock traders, bond traders and forex traders were not ready to adjust their views on the pace of Fed rate hikes.

Leading tech stocks like Apple, Microsoft, Alphabet, and Amazon were moving higher in today’s trading session. Meanwhile, Tesla found itself under pressure after cutting prices for its cars in China.

Interestingly, consumer defensive stocks were among market leaders today. Retailers like Dollar Tree, Costco, Dollar General and Walmart were up by 2-4%. Traders bet that the slowdown of the economy will provide support to these companies as consumers focus on essential needs.

Basic materials stocks were the biggest losers in the S&P 500. Fertilizer producers CF Industries and Mosaic, copper producer Freeport-McMoRan, and gold producer Newmont Corporation were under some pressure today. It should be noted that there were no big moves in this market segment as the pullback in commodity markets was limited.

After the market close, the leading electronic systems design company Cadence Design Systems reported revenue of $903 million and adjusted earnings of $1.06 per share, beating analyst estimates on both earnings and revenue. The company expects to report revenue of $870 million – $890 million and adjusted earnings of $0.89 – $0.93 per share in the next quarter. The stock is swinging between gains and losses in the post-market session.

S&P 500 Is Moving Towards The 50 EMA

S&P 500 is currently trying to settle above the resistance at 3805. The 50 EMA is located at 3815, and S&P 500 will likely face material resistance in the 3805 – 3815 area. S&P 500 needs to settle above the 50 EMA to continue its rebound.

In case S&P 500 gets above 3815, it will move towards the next resistance level, which is located at 3835. A move above 3835 will open the way to the test of the resistance at 3885. If S&P 500 climbs above this level, it will head towards the next resistance level at 3915.

On the support side, the previous resistance at 3760 will serve as the first support level for S&P 500. If S&P 500 declines below this level, it will head towards the next support level at 3730. A successful test of the support at 3730 will push S&P 500 towards the support at 3700.

For a look at all of today’s economic events, check out our economic calendar.

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