U.S. stock markets were set for a second straight significant rally after the second round of the trade tension between U.S. and China began, which has made intraday swings from a loss of roughly 2 percent in the S&P 500 index. With an eased risk-averse among investors, however, the S&P 500 has been closing up 1.2 percent to 2640.5 points.
Some economists are seeing that the current market is now sitting at the tail of the economic growth section, any big economic events could bring a significant reaction to stock markets, like every time of announcement about item listing on tariffs either of two parties will lead to tumble in equities. But in the contrast, any eased tone will in turn trigger rebound. What gives investors some confidence is that Representatives from China and the U.S. left the door open for a negotiated solution to avoid tariff proposals that wouldn’t take effect for months.
There is also a bad news for equity markets, which is the 10-year Treasury yields turned higher to trade around 2.80 precent. We can probably see 2.63 percent of 10-year Treasury yields can be a threshold of stock’s performance, meaning that a higher yield than 2.63 percent will likely drive investors out of the stock market.
Federal Reserve officials highlighted the difficulty in assessing the impact of the trade dispute uncertainty to an otherwise bright economic outlook. St. Louis Fed President James Bullard said investor anxiety may suppress Treasury yields, in turn limiting the Fed’s ability to fulfill projections for another two rate increases this year, because further hikes might invert the yield curve.
Keep an eye out for this week’s labor market condition data, including March’s NFP and unemployment rate. There, the employment added in the non-farm section is expected to decrease to 189,000 from 313,000.
On a daily chart, the intraday S&P 500 index keeps the upswing momentum started two days ago, almost approaching the 38.2% (2661) Fibonacci retracement level, which could be a major resistance for further increase. Additionally, increased RSI tends to lead the way for further rise until that resistance.
If the index does end up its uptrend at 38.2% retracement and turn around, it will see some supports on the 23.6% Fibonacci retracement near 2609.
Chart 1: SPX500 Daily
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