Market News
US consumer concerns only strengthen resistance on US futures
Weakening consumer indicators and disappointing earnings from Home Depot underscore challenges for the US economy. While tech stocks have buoyed markets, resistance on e-mini S&P 500 futures at 4145/4190 remains firm, with signs pointing to potential corrections ahead.
US Consumer Concerns Strengthen Resistance on US Futures
Big Tech has been instrumental in driving US equity gains since March, but growing signs of consumer belt-tightening are emerging as a major headwind. Consumption, accounting for around two-thirds of the US economy, is showing increasing fragility, which may reinforce resistance on e-mini S&P 500 futures.
Key Highlights:
• Weakening Consumer Indicators:
• Michigan Sentiment (prelim): Dropped to a six-month low, with sharp declines in both current conditions and expectations. Long-term inflation expectations rose to their highest since 2011.
• Retail Sales for April:
• Headline growth of +0.4% MoM missed the +0.7% forecast.
• Core Retail Sales also fell short at +0.4% (vs. +0.5% expected).
• Revised March data showed further downgrades.
• Despite YoY growth near 2%, the monthly data remains tepid, painting a cautious picture for Q2.
Home Depot Misses on Earnings and Guidance:
Home Depot’s quarterly results underscored the strain on consumer spending:
• Revenues: Missed estimates by over $1 billion at $37.3 billion.
• Guidance: Full-year sales now expected to decline by 2% to 5%, down from prior flat expectations. Earnings are forecast to drop 7% to 13%, compared to a 5% earlier estimate.
The home improvement sector, already facing post-pandemic challenges, continues to grapple with inflationary pressures, signaling further spending reductions.
E-mini S&P 500 Futures Face Firm Resistance:
• Institutional traders remain skeptical, as reflected in significant net short positions on the Commitment of Traders report.
• Futures have been stuck under strong resistance at 4145/4190 for weeks. Momentum indicators, including RSI and Stochastics, suggest weakening bullish strength.
• Key support levels to watch:
• Initial: 4111.
• Critical: 4062.
Broader Market Implications:
• The rally has been heavily reliant on growth stocks, with Big Tech doing much of the heavy lifting.
• If tech momentum falters, the broader market rally, particularly since March/April, could unravel.
Outlook:
With consumer indicators flashing caution and institutional traders expressing doubts, the risk of a corrective move in futures is rising. The e-mini S&P 500’s ability to break resistance or sustain support will be critical in determining the next phase for US equities.
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