Market News
There’s still room to run in a near-term pullback on US index futures
US index futures face a near-term pullback as hawkish Fed expectations weigh on sentiment. Encouraging consumer data and resilient trends in key sectors suggest this correction is a healthy pause, presenting a potential buying opportunity.
There’s Still Room to Run in a Near-Term Pullback on US Index Futures
Traders of US index futures have observed a recent retreat, with both e-mini NASDAQ 100 and S&P 500 futures facing consecutive sessions of lower daily highs. After a prolonged rally since mid-March, this pullback signals a natural correction, offering the potential for renewed buying opportunities.
Key Highlights
• Hawkish Fed outlook has weighed on futures.
• Fears of a US recession may be overdone as consumer data remains strong.
• Corrections on index futures appear near-term and healthy.
A Hawkish Outlook for the Fed Weighs on Futures
Markets have priced in further tightening from the Fed in 2023. Following the “hawkish hold” at the June FOMC meeting and Fed Chair Powell’s Congressional testimony, the CME FedWatch tool indicates a 72% probability of a 25bps hike by year-end, with potential cuts pushed into Q2 2024. This outlook has pressured index futures as core inflation remains stubbornly high at 5.3%.
The US Consumer Perks Up
Despite market corrections, recent data suggests resilience in the US economy, led by consumer strength:
• Core Durable Goods Orders rose by +0.6% against flat expectations.
• Consumer Confidence jumped to a 15-month high of 109.7.
• New Home Sales surged to 763,000, far exceeding forecasts of 677,000.
These data points underscore the robustness of the US consumer and hint at potential stabilization in index futures if upcoming reports, such as ISM and Nonfarm Payrolls, also deliver positive surprises.
A Near-Term Pullback in US Futures
Both NASDAQ 100 and S&P 500 futures are in near-term corrections, likely offering opportunities to buy:
E-mini S&P 500 Futures
The retreat from 4462 has helped unwind momentum indicators, with the RSI suggesting support between 50–60. Initial downside support lies at 4305/4340, with key medium-term breakout support at 4200/4227.
E-mini NASDAQ 100 Futures
The pullback from 15322 has brought futures towards the support zone at 14570/14853. Previous corrections in April (-4%) and February (-9%) provide a benchmark, with a move to 14570 representing a -5% correction.
Outlook
While these pullbacks may have further to run, the robust data and market resilience suggest this correction is a healthy pause in the rally, offering the next buying opportunity.
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