On Wednesday, the S&P 500, Nasdaq 100, and Dow Jones all experienced a decline, indicating a continued aversion to risk in the market. The possibility of a fiscal tightening resulting from a prospective US debt ceiling agreement has contributed to this negative sentiment throughout the week. Additionally, recent economic developments have likely intensified this downward trend in stock markets over the past day.
The Asia-Pacific trading session on Wednesday saw the release of the latest Chinese Manufacturing PMI, which indicated a disappointing performance in all aspects, suggesting a slowdown in global growth expectations. At the same time, the April US JOLTS job openings data revealed a surprising increase, resulting in approximately 1.8 job openings per unemployed individual in the country.
The financial markets have demonstrated a growing confidence in an imminent 25-basis point rate hike by the Federal Reserve in July, although it is probable that there will be a pause in June. In light of recent remarks by Federal Reserve Governor Philip Jefferson, abstaining from a hike might be a realistic option as it will provide an opportunity to evaluate the available data. However, it is important to note that economic conditions are unpredictable and subject to change. The upcoming non-farm payrolls report, scheduled for release on Friday, will provide further insight into this matter.
Given this consideration, it is possible that the Asia-Pacific trading session on Thursday might emulate the trends of Wall Street. Consequently, there is a likelihood that regional indices such as Japan’s Nikkei 225 and Australia’s ASX 200 may be exposed to risks. This could lead to a scenario where market sentiment takes center stage as the primary driver of market activity due to the absence of significant economic news.
S&P 500 Technical Analysis
The S&P 500 is currently displaying a Rising Wedge chart formation on its daily chart, with indications of negative RSI divergence implying a decline in upward momentum. Such trends can be indicative of an impending downturn. Should the wedge be breached, attention would shift towards support levels, specifically the 38.2% Fibonacci extension at 4109.