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S&P 500: Where will the stock market move after the Fed meeting?

Relevance up to 06:00 2022-07-28 UTC–4

The dynamics of the dollar and the US stock market will depend on the rhetoric of the accompanying statements by the Fed leadership. The Fed press conference will begin 30 minutes after the anouncement of the decision on interest rates (at 18:30 GMT), which will be of great interest to investors.

Meanwhile, the major US stock market indices have continued to develop an upward trend since the beginning of this month.

Thus, the S&P 500 broad market index (reflected as CFD #SPX in the trading terminal) is trading near 3958.00 as of this writing, continuing to correct after the strongest fall since the beginning of the year to the key support level of 3660.00, which separates the long-term bullish trend from the bearish one. You should also pay attention to the important support level 3950.00. Its breakdown in one direction or another will determine the direction of further dynamics of the S&P 500.

Quite positive macro data are coming from the USA, at least with better indicators than in Europe.

Thus, the PMI index of business activity (from ISM) in the US services sector, although it fell from 55.9 to 55.3 points in June, turned out to be significantly better than forecasts of a drop to 54.5 points, while also remaining well above the level of 50.0, separating the growth of business activity from its slowdown.

US manufacturing PMI also remains well above the 50.0 level (53.0 in June, according to ISM data earlier in the month).

At the same time, the unemployment rate in June remained at around 3.6%, and the number of people employed in the non-farm sector increased by 372,000, exceeding the economists’ forecast of growth by 240,000 (the number of jobs in the US manufacturing industry increased by 29,000 in June after an increase of 18,000 in May, which also turned out to be higher than the forecast growth of 15,000).

Strong data on the US labor market, coupled with positive data in the main areas of the US economy, provide the Fed with more room to maneuver when choosing a monetary policy vector.

Positive main macro data allow reducing the degree of negative assessments about the possibility of a recession in the US economy against the backdrop of improved prospects for stabilizing inflationary pressures without a sharp deterioration in working conditions.

American consumer confidence also improved in July. This is evidenced by the preliminary index of consumer confidence published in the middle of the month (from the University of Michigan). This indicator reflects the confidence of American consumers in the economic development of the country. The growth of the indicator and its relatively high level indicates the growth of the economy: in July it came out at 51.1 against the forecast of 49.9 and after a value of 50.0 in June.

In this regard, today’s market participants will also pay attention to the publication at 12:30 (GMT) of data on orders for durable and capital goods.

This indicator reflects the value of orders received by manufacturers of durable goods and capital goods that involve large investments. The growth of this indicator is a positive factor for the dollar and US stock indices. However, a relative decrease in indicators is expected, which may put pressure on the dollar and US stock indices.

However, the impact on the market of this publication will be short-lived, given the upcoming main event today–the Fed’s interest rate decision. We recall that it will be published at 18:00 (GMT).

*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.

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