S&P 500 Forecast: SPX falls on slower Fed rate cut worries

US futures

Dow future -0.39% at 43575

S&P futures -0.57% at 5917

Nasdaq futures -0.93% at 20700

In Europe

FTSE 0.01% at 8068

Dax  -0.19% at 19212

• US retail sales rise 0.4% MoM vs 0.3% expected
• Fed Powell said the central bank is in no rush to cut rate
• USD is set to rise 1.3% this week
• Oil steadies after losses earlier in the week

US retail sales rise 0.4% MoM

U.S. stocks fall as investors digest stronger than expected US retail sales and more hawkish comments from Federal Reserve chair Jerome Powell.

US retail sales rose 0.4% MoM in October, and September’s print was revised higher to 0.8% Month over Month. The reading was ahead of the 0.3% forecast. The data highlighted the resilience of the US consumer as US data continues to be strong, supporting Fed Chair Jerome Powell.

In a speech on Thursday, Powell said that the central bank was in no rush to cut interest rates amid ongoing economic growth, a resilient job market, and inflation still above the Federal Reserve's 2% target. U.S. Treasury yields rose following Powell's comments, and stock indices fell lower.

The market has reined in expectations of a 25 basis point rate cut in December to 50/50, down from 80% yesterday. The market is now only expecting 71 basis points of rate cuts by the end of next year.

All three stock indices are on track for a weekly loss. The election rally fizzled as attention shifted to the state of the economy and potential risks.

Corporate news

Apple points to a lower open after Berkshire Hathaway sold around 1/4 of its stake in the iPhone maker, equating to around 100 million shares in Q3.

Meanwhile, Domino's Pizza soared 7%, and Pool Corporation rose 5.9% after Warren Buffett's firm took stakes in the fast food chain and swimming pool supplier, according to regulatory filings.

Alibaba ADRs rose 3% after the Chinese e-commerce giant posted better-than-expected Q3 earnings thanks to growth in its cloud business.

S&P 500 forecast – technical analysis.

The S&P 500 ran into resistance at 6027 the ATH before easing lower. The price is extending its selloff for a second day, breaking below the multi-month rising trendline as it heads towards support at 5880, the October high. A break below here negates the near-term uptrend and exposes the 50 SMA at 5765 ahead of 5700, the November low. While the price holds above the 5880 level, the uptrend remains intact.

FX markets – USD falls, EUR/USD rises

The USD is falling but is still on track to book its strongest weekly rally since late September, boosted by the Trump trade, rising inflation, and a more hawkish-sounding Powell.

EUR/USD is rising, but it's still set to fall sharply across the week amid fears of what trade tariffs could mean for the economic recovery and for ECB rate cuts. Today, German wholesale prices rose by more than expected to 0 point 4%, up from -0.3%.

GBP/USD is rising on USD weakness, but it's still set for losses of 1.8% this week. UK GDP showed the economy stalled in Q3 at 0.1% growth, down from 0.2% in Q2. GDP in September fell -0.1% MoM. The data comes after Bank of England governor Andrew Bailey warned about the impact Brexit had had on the economy.

Oil steadies after losses earlier in the week

Oil prices have picked up their weekly lows but is still on track to fall 2.6% this week with a move to the downside looking more likely than any strong recovery.

Sentiment towards oil is waning amid growing signs of surplus supply from non-OPEC producers such as Brazil, Canada, and Guyana and worries that OPEC+ could still decide to start unwinding production cuts over the coming months.

According to the latest IEA report, oil could be heading for a supply excess of over a million barrels a day, owing largely to cooling demand.

China's oil refiners processed 4.6% less crude oil in October than a year earlier, owing to plant closures and lower operating rates. The country's factory output growth also slowed last month, fueling demand worries.

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