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S&P500 Forecast: SPX rises despite Trump tariff threats

Article By: ,  Senior Market Analyst
Tuesday 2:00 PM

US futures

Dow future -0.37% at 44,547

S&P futures 0.25% at 6001

Nasdaq futures 0.35% at 20870

In Europe

FTSE -0.18 % at 8279

Dax  -0.3% at 19350

US stocks rise after record highs yesterday

Trump pledges trade tariffs on Mexico, Canada and China

Fed minutes are due later today

Oil rises after overdone selloff on Israel ceasefire talks

Trump trade tariffs= threats & FOMC minutes

U.S. stocks are heading higher building on recent gains as investors weigh up the implication of Trump's tariffs on its top trade partners.

President-elect Trump said he would impose a 25% tariff on Canadian and Mexican imports and an additional 10% tariff on imports from China. The main concern is that new tariffs could intensify global trade frictions and slow economic growth, which is fragile at best.

However, the market seems to be moving past these threats, while some think they may not materialize at all and could just be negotiation tactics.

Trump’s comments follow yesterday's nomination of Scott Bessent as Treasury Secretary, whose selection drove stocks higher and treasury yields lower. Bessent is expected to adopt a more moderate approach to trade tariffs than Trump. It would appear that Trump was keen to show that he was still in control.

On the data front, consumer confidence is due to be released, and the market will also consider the minutes from the November FOMC meeting, during which the Federal Reserve cut interest rates by 25 basis points.

The minutes come ahead of tomorrow's core PCE figures and as traders pricing a 59% probability of the Fed cutting interest rates in December. The market has recently lowered Fed rate cut expectations after recent strong data, hawkish Fed comments, and expectations of inflationary policies from Trump.

Corporate news

Kohl’s is falling 13% after the retailer posted disappointing Q3 results and significantly lowered its full-year outlook. EPS was 0.20 short of expectations of 0.31, and revenue declined 8.8%.

BestBuy falls after missing Q3 profit forecasts and cutting its annual sales and profit outlook, pointing to sluggish demand across the holiday period.

Ford is set to open 1.8% lower, and General Motors is dropping 3.8% as investors dump the auto giants following Trump's tariff comments. These stocks have highly integrated supply chains through Mexico, the US, and Canada.

S&P 500 forecast – technical analysis.

The S&P500 has recovered from the 5830 low, rising above 5880 to 6021 within a breath of its record high. Buyers supported by the RSI over 50 will look to rise above 6027 to fresh ATHs. Support can be seen at 5880, the October high. It would take a break below 5830 to create a lower low.

FX markets – USD falls, EUR/USD rises

The USD is falling after gains in the previous week. The USD is tracking treasury yields lower after Trump’s Treasury Secretary nomination, which has gone down well with the bond market. However, this fall in the USD could be short-lived, with core PCE and Fed minutes in focus this week.

EUR/USD is rising for a second straight day recovering from earlier losses amid an improvement in risk sentiment. However, gains could be limited given ECB - Fed divergence in policy and the weaker outlook for the eurozone economy.

GBP/USD is rising for a second straight day, supported by hawkish Bank of England comments that policymakers are supporting a gradual pace of rate cuts. This is overshadowing the latest CBI data, which shows that British retailers' optimism is at a two-year low following the labour budget.

Oil rises after an overdone selloff yesterday

Oil prices origin higher on Tuesday after falling sharply in the previous session reports of Israel and Lebanon's Hezbollah moving closer to a ceasefire agreement.

Multiple reports that Israel and Lebanon have agreed terms for a ceasefire have removed some of the geopolitical risk premium on oil prices. However, the move could be overdone, given that the Middle East conflict hasn't actually disrupted oil supplies significantly at any point during its war.

OPEC+ will meet on Sunday and is expected to leave oil output cuts in place, postponing the unwinding of the voluntary cuts until oil prices stabilise.

Meanwhile, concerns over the demand outlook in China are keeping gains muted. Trump's pledging a further 10% tariff on imports from China could impact the economy, hitting the oil demand.

 

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