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26.05.2023 01:43 PM
US premarket on May 26: US stock market continues to recover

Futures on US stock indices rose on Friday amid optimism and spreading rumors that a deal to raise the US debt ceiling is very close. S&P 500 futures have returned to the green zone and show a 0.2% increase, while the NASDAQ index has also gained about 0.2%. Treasury bond yields remained at a two-month high as investors still await news on whether US lawmakers will reach a debt agreement before the weekend or not. The yield on two-year Treasury bonds stood at 4.49%.

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The European stock market also remained relatively unchanged after the mining industry stocks stopped their growth. Among the leaders in premarket trading, shares of Marvell Technology Inc. rose by 17% after the chip manufacturer predicted a significant increase in revenues from artificial intelligence technologies. Other technology companies, such as Salesforce Inc., Advanced Micro Devices Inc., and Intel Corp., rose by more than 1%.

The market is still focused on negotiations regarding the US debt ceiling. In recent days, the parties have narrowed their differences on many issues, although the agreed-upon details are preliminary, and a final agreement has yet to be reached. Both sides have to agree on the debt ceiling. Under the terms of the new agreement, defense spending next year could increase by 3% according to President Joe Biden's budget request. The Speaker of the House also signaled optimism about the debt deal yesterday.

Today, we await the core PCE price index - a particularly preferred inflation indicator by the Federal Reserve. A weakening of price pressure and a decrease in the index will have a positive impact on stock indices, but it is unlikely to lead to a bull rally. The focus will be on the results of negotiations between Republicans and Democrats on the debt ceiling.

In the UK, the British pound strengthened after strong retail sales data increased expectations that interest rates will continue to rise and the Bank of England will not abandon its tight policy in the near future.

Oil has slightly recovered after yesterday's major sell-off, which occurred following the news that OPEC countries do not intend to abandon the current production level. Gold has also slightly recovered and is trading in positive territory after almost 11 days of decline.

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As for the S&P 500 index, demand for the index remains, and buyers still have a chance to return within the range of the sideways channel, although it is quite challenging to do so. Bulls need to reach $4,143, from where a surge to $4,175 may occur. Bulls should control $4,203, which will allow them to establish a new bull market. If the pair declines amid persistent debt problems and weak US statistics, bulls should protect $4,143. Breaking through this level, the trading instrument may drop to $4,114 and $4,091.

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