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US stock futures opened modestly higher, with S&P 500 futures trading up 0.1% and the tech-heavy NASDAQ up 0.2%, following a calm trading session yesterday. US Treasury yields have risen, while the US dollar's strength has weakened. Oil prices hover around $95 a barrel, boosting European indexes. The strength in oil company stocks has pulled the entire market upward. European inflation data has buoyed market sentiments as rising oil prices further amplify inflationary concerns.
Big oil companies, including TotalEnergies SE, BP Plc, and Shell Plc, contributed significantly to the European Stoxx 600 index, which gained 0.3%. The energy market will likely be a challenge in the latter half of this year. Since mid-June, oil prices have surged by about a third, as Saudi Arabia and Russia collaborated to limit production to boost prices. This adds pressure on central bank leaders trying to curb inflation while managing economic risks.
Expectations of persistently high rates have dampened the enthusiasm for tech stocks, which led the US stock rally earlier this year. According to Citigroup Inc. strategists, investors might prepare for further declines in the Nasdaq 100. With a looming recession, it would not be surprising if NASDAQ does not reach new highs this year. However, with the Federal Reserve possibly maintaining interest rates this week, traders will focus on the updated economic forecasts. Key questions are whether policymakers will stick to their prediction of another 25 basis-point hike by year's end and when they will begin policy easing in 2024.
The Fed is likely to emphasize that the battle against inflation is not yet won and that the FOMC will be heavily data-driven in future rate decisions, leaving the door open for a possible rate hike later this year. However, if the Fed's statements become more hawkish, we are likely to see a continuation of the recent bearish trend.
As for the S&P 500, the demand for the index remains rather weak. Bulls need to take control of $4,469. Reaching above this level, they may push the price to $4,488. In addition, bulls also should control $4,515, strengthening the bull market. If the index declines amid lower risk appetite, bulls will have to protect $4,447. Breaking through this level, the trading instrument may return to $4,427 and $4,405.
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