Stocks Down Despite Dollar Selling
US stocks remain in a precarious position as we move through the back end of the week. Despite the sell off in USD over recent weeks, stock prices have plummeted with Trump’s tariff war sparking a wave of risk aversion. Indeed, stocks have been unable to benefit from the dovish shift in Fed pricing over the last month.
Weaker US data has seen pricing for a Fed cut coming back in from later in the summer where projections had been settled earlier in the year. The market is now looking for a cut by June. However, with fears that Trump’s tariff war could drive the US into recession, stock prices have been stuck in a negative cycle.
Tariff Fears Vs Inflation
Looking ahead, the big focus will remain on Trump’s tariff agenda. Any negotiations, reversal of tariffs or signs that tariffs might be reduced, should help sentiment recover leading to a rebound in stock prices. However, while Trump’s rhetoric remains aggressive and should tariffs be increased or fresh tariffs placed on other trading partners, bearish sentiment is likely to deepen with sticks vulnerable to a fresh move lower. Indeed, while yesterday’s weaker-than-forecast CPI data should have bolstered stocks, feeding into dovish Fed expectations, fears over the impact of Trump’s tariffs (yet to be seen) saw stocks reversing initial gains post-data.
Technical Views
S&P Futures
The sell off has seen the market breaking down through the long-term bull trend line from 2023 lows, recently breaking below support at 5,721.25. Price is now sitting on support at the 5,592.50 level with risks of a further break down towards 5,399 seen, in line with bearish momentum studies readings.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.