Iran War & Hawkish Fed Risks Weigh on Stocks
NFP Up Next
US stocks remain weak on Friday with the S&P still down from highs and struggling to stay above the 6,811.25 level. For now, the market remains subject to volatility around incoming Iran headlines. A fresh surge in energy prices as a result of the conflict has seen Fed easing expectations disappearing near-term, creating strong upside in USD, and creating headwinds for stocks. Looking ahead today, traders will be watching the latest US jobs data. Any upside surprises in today’s data should create fresh demand for USD, further weighing on Fed easing expectations, pushing stocks lower.
Shifting Fed Views
The conflict with Iran poses heavy risks for US stocks with the prospect of Fed tightening entering the discussion if energy prices continue to push higher and inflation starts to trend upward again. In this context, stocks could start to correct much lower. The economic impact of the war is also a concern for equities, particularly if the conflict drags on longer than expected. Already we’ve heard the administration shift their target timeframe from up to weeks to up to eight weeks. If we see a further extension, stock sentiment is likely to weaken further near-term. On the other hand, any news that the US and Israel will pause their attacks on Iran, or that negotiations have started, should leave room for a sharp relief rally in stocks.
Technical Views
ES (S&P E-mini futures)
For now, the market remains below the broken bull trend line and is sitting on support at the 6,811.25 level. With momentum studies bearish, risks of a break lower are seen. If we do push down from here, 6,587.50 will be the next support to note.
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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.