The global stock market came under pressure from recession risks and political tensions in Russia, a major supplier of commodities. For example, the SNP500 fell by 1.16% and the DAX by 1.89% since Friday. However, the stock market quickly rebounded during yesterday’s trading session, regaining previous losses from Monday. All global indices appreciated during yesterday’s trading session, but US stocks experienced the strongest bullish price movement. Why are stocks rebounding?
The most recent stock market decline is due to interest rate hikes and recession risks backed by poor economic data. However, economic data from yesterday paints a very different picture. Core Durable Goods Orders rose to a 4-month high and read much higher than previous expectations. In addition to this, the CB Consumer Confidence rose from 102.5 to 109.7, New Home Sales data rose to a 14-month-high, and the Richmond Manufacturing Index read better than expectations. All economic data indicates that investors are wary of a recession, but this has not materialised or is yet visible. As a result, investors returned to the stock market as investor sentiment rose. However, global banks are advising that a recession is still likely in the fourth quarter of 2023. The latest bank to suggest this is HSBC, which advises that the downturn is not currently priced into equities.
The higher risk appetite within the market also affected other assets, including safe haven assets. Gold declined after the economic releases, declining by 0.37%. According to the US Commodity Futures Trading Commission, over the past week, the number of positions remains in favour of a decline. The report stated 95,000 positions speculating a climb and 254,000 speculating a decline. On the other hand, the US Dollar Index remains unchanged this week but is showing a slight rise this morning, trading at 102.67. This afternoon, the open discussion panel between central bankers will influence assets from all asset categories.
NASDAQ
The NASDAQ rose by 1.06% during yesterday’s trading and opened on a bullish price gap this morning. Of the 101 stocks within the NASDAQ, only 15% of stocks ended lower, and only one of the top ten influential stocks within the index declined. The only decline within the top ten was Alphabet which saw a slight decrease measuring 0.13%.
The best-performing stocks within the NASDAQ over the past 24 hours were Lucid Group (up 8.90%), Old Dominion Freight Line (up 7.34%) and Charter Communications (up 5.41%). The worst-performing stock was Walgreens Boots Inc, which declined by 9.26%. However, traders should note that Walgreens Boots Inc is one of the less influential stocks within the index due to only holding a composite weight of 0.18%. Lastly, investors should note that Apple stocks are in the spotlight as the stocks have reached a new all-time high after increasing by 1.50% yesterday.
NASDAQ 4-Hour Chart on June 28th
The price has been supported in the short term due to positive economic data. However, investors should note that the data is inadequate to maintain growth in the longer term. Ongoing positive economic data will need to be maintained in order for an upward trend to continue. In the short term, investors will concentrate on the US Gross Domestic Product and PCE Price Index. Bulls will aim for economic growth indications, but a lower PCE Price Index. As a result, the data will point away from a recession and higher interest rate hikes. This potentially can further fuel bullish price movement.
A slight concern for investors is the bond market and recent auctions. The auctions for placing short-term bills saw yields on 3-month and 6-month Treasuries priced at 5.18% and 5.21%. This is significantly higher than previous auctions, and 2-year bonds also saw much higher yields. If the market’s risk appetite declines, for whatever reason, the high yields can put significant pressure on the stock market.
Regarding technical analysis, the asset has yet to obtain a solid upward trend signal despite yesterday’s bullish price movement. However, bullish signals from indicators can intensify if the price increases above the $14,983 level. This will be cruel for traders looking to speculate an upward correction as it also mirrors Fibonacci’s 50.0 level. The price of the NASDAQ is trading above the 75-bar exponential moving average, indicating buyers may gain control of the market. However, crossovers are facing downwards. Therefore, investors will aim for an upward crossover while the price remains above the 75-bar EMA.
NASDAQ 30-Minute Chart on June 28th
Nonetheless, investors should be reminded, despite what technical analysis may signal, the GDP and PCE Price Data will most likely be key drivers of the price. Investors will specifically hope for a PCE Price reading lower than 0.2%. Global equities continue to increase during this morning’s Asian session and European opening. Investors consider this as an indication of positive investor sentiment. The Nikkei225 rose by 2.02%, and the French CAC is 0.885 higher since the European Open.
Summary:
- Global equities rebound after recession risks ease due to positive US economic data.
- Core Durable Goods Orders rose to a 4-month high and read much higher than previous expectations. Consumer Confidence rose from 102.5 to 109.7, and New Home Sales data rose to a 14-month-high.
- NASDAQ bulls will aim for economic growth indications, but a lower PCE Price Index. As a result, the data will point away from a recession and higher interest rate hikes.
- Global equities continue to increase during this morning’s sessions. Investors consider this as an indication of positive investor sentiment.