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On Friday, US stock indices continued their rally initiated on May 24. Traders are trying to pare losses seen in the market over the past seven weeks. Thus, there is a likelihood that the market will end its losing streak and close the trading week with gains. The Dow Jones Industrial Average rose by 34 points, or 0.1%. The S&P 500 and Nasdaq 100 indices gained 0.3% and 0.4% respectively. Moreover, these indices are likely to end the week on a positive note. Over the week, the Dow Jones and the S&P 500 have been up 4.4% and 4% respectively.
Nevertheless, the Nasdaq Composite is still in bear market territory, while the S&P 500 has already attempted to move below the 20% level where it started its downtrend from. Yesterday, the Nasdaq remained 27.6% below its high, while the S&P 500 and Dow Jones were down 15.8% and 11.7% respectively.
Many experts talk about a possible strong rebound. Indeed, the prevailing mood among investors is bullish. However, everything can change if the US Federal Reserve takes a more aggressive approach to surging inflation, or the US economy slows down even more significantly - as happened yesterday, following the release of the second estimate of first-quarter GDP in the United States.
Today's macroeconomic calendar is full of important releases, including personal income and spending as well as the core personal consumption expenditures (PCE) index.
Meanwhile, tensions between China and the US have escalated following Secretary of State Anthony Blinken's comments about Chinese President Xi Jinping. As a new challenge to Beijing, the US and Taiwan are planning to announce economic talks to deepen their trade and economic ties. Of course, Russia's military special operation in Ukraine is also a cause for investors' concern. The United States may announce a new package of aid for Kyiv as soon as next week that would include long-range rocket systems and other advanced weapons. British Prime Minister Boris Johnson also called for further military support for Ukraine by proposing sending the country advanced weapons such as multiple launch rocket systems. Johnson seems to care more about Ukraine than about his own country's economy. As you know, amid skyrocketing food and energy prices, inflation in the UK jumped to 9% on an annual basis last month, reaching its highest level in 40 years. Moreover, the Bank of England expects the consumer price index to exceed 10% at the end of this year. Thus, the cost of living crisis is gaining momentum in the UK.
Premarket
Shares of Ulta Beauty rose by about 8% in premarket trading after the company reported better-than-expected quarterly performance results.
Gap stock fell by almost 20% after the company slashed its profit outlook for the year. Analysts cut the firm's profit guidance for the full year as a steep decline in sales weighed on results for the fiscal first quarter.
Shares of Zscaler Inc. advanced after the security software company reported better-than-expected performance results.
S&P 500 technical analysis
If bulls do not let the trading instrument go below $4,040, the nearest target will be the resistance level of $4,080. Its breakout will push the index up to the area of $4,116 and $4,157. In case market sentiment turns pessimistic amid Fed members' talks about high inflation and the need to combat it, and bulls' trading activity is subdued at $4,040, we will see a major sell-off to the levels of $4,013 and $3,975. The area of $3,858 can be seen as a more distant target.
Traders are recommended to read the following articles:
Forex Analysis & Reviews: Haruhiko Kuroda: Japanese yen is resistant to future Fed policy
Forex Analysis & Reviews: Fed minutes show monetary policy to remain unchanged
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