US stock index futures rose slightly on Friday, but investors are still not ruling out that the bear market may continue, so they are acting with quite a bit of caution. Dow Jones Industrial Average futures increased by 242 points or 0.76%. Futures on the S&P 500 jumped by 1% and futures on the Nasdaq-100 gained 1.73%. At the end of yesterday’s trading, there was quite a struggle, as the inflation data released this week clearly indicated the need for further interest rate hikes, but the question is whether the Federal Reserve needs to act more aggressively, or whether the best option would be to raise rates according to the approved plan.
The S&P 500 and Dow Jones indices rebounded from their intraday lows on Wednesday, but still closed lower. The S&P index declined by more than 18% from its all-time high. The bear market will officially start when the losses are over 20%, so there is still a chance for a bailout. The Nasdaq index added less than 0.1% on Wednesday, but that did not save it, as the tech index is already maintaining a bear market, down more than 29% from its all-time high. Loss-making tech stocks continue to drag the entire sector down.
Some experts are talking about the bursting of the tech sector bubble, which has been heavily overbought on the back of the Fed’s ultra-soft monetary policy over the past two years since the pandemic coronavirus began. Now one of the reasons investors have struggled in recent months is high inflation and the Federal Reserve’s attempts to curb rising prices by increasing rates.
The market growth in March after the first interest rate hike in the US was completely diminished by a sudden fall in April. The May rate hike of 0.5% at once is also painful and it is possible that we may see another aggressive hike of 0.75% in June. Of course, there are some signs of market stabilization as Treasuries feel more or less steady. However, many investors expect that the market may have to decline further.
As for economic data, April import prices and a preliminary analysis of consumer confidence in May will be released on Friday.
Twitter shares fell by nearly 20% in the premarket after Elon Musk announced that the takeover deal had been temporarily suspended. The main reason for suspending the deal is false information about the number of fake accounts on the platform. Until a clear analysis and detailed information are provided, we will not see progress on the deal.
As for the technical picture of the S&P 500
With a good start to the day, the bulls may take a break at the end of the week in an attempt to find the bottom. While the asset is trading above $ 3,964, bulls need to protect this level. It may be tested immediately after the release of the data on the US economy during the regular session.
If traders protect $ 3,964 and reach above this level, it may strengthen their confidence, counting on an upward correction. However, it is too early to talk about hitting the bottom. A consolidation above $ 4,005, the nearest resistance level, will allow the asset to return to $ 4,037 and touch $ 4,069. In the case of pessimism and more talks on high inflation and the need to curb it, we are likely to see a major sell-off below $ 3,964. A decline below that level would quickly push the index to a low of $ 3,924. If you miss this level, it is better to postpone buying the trading instrument until it reaches a low of $ 3,882.
* The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.