S&P 500: in the bull market territory

 
 
 
 
 
 
 

US Broad Market Index S&P 500, consisting of 500 American companies with the largest capitalization, yesterday set its next all-time high, and today the S&P 500 futures have already updated it, rising to 3994.0 mark during the European session.

Investors generally reacted positively to US President Joe Biden's speech yesterday.

Speaking in Pittsburgh, where his campaign kicked off, Biden unveiled a $ 2.25 trillion infrastructure plan focused on repairing roads and bridges, expanding access to broadband internet, and increasing spending on research and development.

The plan also calls for higher taxes on companies to fund the proposed measures. "The goal of the plan is not to patch holes. It is an investment in America that is only possible once in a generation", Biden said.

Despite the fact that the market reaction to Biden's speech was not as pronounced as expected, since Biden's plan is already for the most part taken into account in prices, nevertheless, American stock indices received a new impetus for further growth.

However, some market participants fear that Biden's plan may meet resistance in Congress. At the same time, the US budget deficit will grow, and the FRS prefers to take a wait and see attitude, not reacting to the growth of government bond yields and maintaining a soft monetary policy. These reasons can limit the growth of stock indices and the strengthening of the dollar.

Markets expect the US economy to grow faster than the European and other major economies. Therefore, market participants will closely monitor the publication of American macro statistics to find confirmation of this, and if macro data from the US does not meet their expectations, then the market may experience short-term sales of the dollar and American risky assets.

So today, at the beginning of the European session, the DXY dollar index is declining after yesterday hitting a local 21-week high at 93.47 mark. DXY futures are traded near 93.12 mark as of this writing, although US 10-year bond yields are holding around 1.720%, 15-month highs.

Economists and market participants continue to assess the prospects for the stock market and the dollar, and in this assessment, on the one hand, there are expectations of accelerated growth of the American economy and the Fed's soft policy, and on the other, accelerated inflation in the United States and the growth of federal debt, given the huge new infrastructure spending.

But for now, the US stock market remains bullish. Major stock indexes maintain positive dynamics in anticipation of a new dollars inflow.

As of this writing, the S&P 500 futures are traded near 3990.0, maintaining positive momentum.

From the news for today, investors will pay attention to the publication at 14:00 (GMT) of the index (PMI) of business activity (from ISM) in the manufacturing sector of the US economy, which is an important indicator of the state of the American economy as a whole. A result above 50 is seen as positive and strengthens the USD; below 50 - as negative for the US dollar. Forecast: 61.3 in March (against 60.8 in February, 58.7 in January, 60.7 in December). The index value is above the level of 50 and previous values, which is likely to support the dollar and US stock indices. If the indicator drops below the forecast and, especially, below the value of 50, the dollar may weaken sharply in the short term, and stock indices may adjust downward.