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The U.S. stock market has been consolidating for the second consecutive week amid conflicting signals that continue to set the tone for equity movements in the current environment. What's behind this trend?
Following a strong rally that began in late April, the U.S. stock market has spent the first two weeks of July consolidating near all-time highs, remaining under the influence of contradictory factors. Let's examine these and try to understand what to expect in the near term.
Two key factors clearly influence the dynamics of all segments of the global financial market, and particularly the U.S. equity market.
The first is the vague and sluggish domestic and foreign policy of Donald Trump, which is built around a central political principle: uncertainty. It seems that the U.S. president is struggling to fully implement his strategy of using forceful tactics to pressure major trading partners into making significant concessions. Meanwhile, smaller trade deals are insufficient to address the trade balance or reduce the massive national debt. Observing the current situation, one can conclude that this state of affairs is likely to persist throughout Trump's presidency.
The second factor is the unclear outlook for a potential resumption of interest rate cuts by the Federal Reserve. Recall that consumer inflation in the U.S. — the Fed's key benchmark for setting interest rates — has been rising, moving away from the 2% target. Under the current policy framework, the central bank is unlikely to lower interest rates in this context. This poses a major downside risk, alongside Trump's "Make America Great Again" agenda.
In addition, an open confrontation is emerging between Trump and Fed Chair Jerome Powell. The president has repeatedly called for rate cuts to 1% or even zero, but the central bank, led by Powell, continues to reject this possibility with justified reasoning. It's unclear who will prevail in this standoff, but for now, the U.S. stock market remains in a state of consolidation, while the U.S. dollar is gaining solid support. Expectations for rate cuts are being pushed further toward the end of the year, and if inflation continues to rise, borrowing costs may not be reduced at all in 2025.
What to Expect on the Markets Today?
The main beneficiary of the aforementioned factors is the U.S. dollar, which continues to strengthen on the Forex market, with the dollar index nearing the 99.00 mark. If this trend continues, the index could hit 100.00 by the end of the month.
Against this backdrop, we may see a limited rise in U.S. equity indices, along with a slight decline in gold prices. Like stock indices, the yellow metal is expected to remain range-bound for the time being.
In general, the overall market picture can be described as moderately positive.
The CFD contract on the S&P 500 futures is trading within a sideways range due to the conflicting factors discussed above. Continued moderate optimism in the market could push the index to a new all-time high of 6,315.00. The 6,276.06 level may serve as a potential entry point for long positions.
The CFD contract on NASDAQ 100 futures remains in an uptrend despite the prevailing headwinds. It is likely to resume its gradual ascent within this trend toward 23,128.70. A possible entry point for long positions is at 22,992.80.
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