Week Ahead: With Trade Resolution, Fed Awaited, Equity Drift Will Continue

S&P 500 finishes week back above uptrend line since December bottom 2-year yield finishes week higher; 3-month and 10-year lower; 3-M:10-Y yield curve still inverted Dollar slips lower

Since a resolution on the U.S.-Sino trade conflict remains in limbo, at least until the scheduled next round of negotiations in October, and the Fed’s appears to be a given later this month, stocks will likely drift during the week ahead.

On Friday, U.S. equities scraped out a third consecutive advance, sealing a second week of robust gains after Fed Chief Jerome Powell acknowledged, during a moderated discussion in Zurich ahead of the weekend, that Fed policy will continue to sustain economic expansion in the U.S., even as some disappointement in Friday’s release allowed for further easing.

Yields, however, closed lower while the finished the trading week well off its lows, suggesting the Fed chief’s remarks did little to alter the outlook.

Supply vs Demand Out of Sync?

The eked out a 0.09% gain on Friday, with sector performance mixed, indicating a lukewarm reception to both the lower than anticipated payrolls release and a dovish Fed.

Private payrolls came in at a three-month low, showing weakness but not devestation. This, along with Powell cementing a view toward additional rate cuts, should have provided ammunition for bulls, but it didn’t. Though the (+0.26%) closed higher on the day, the (-0.17%) and (-0.47%) both finished lower.

The true tailwind for the SPX’s weekly performance was the latest development in the ongoing U.S.-China trade relations roller coaster. The S&P 500 jumped 1.79% higher, with all 11 sectors in the green. (+2.75%) and shares (+2.48%) led the gains, while (+0.37%) lagged.

SPX Daily

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