Daily Analysis US Indices - 13 June 2023
The stock futures inched higher on Tuesday following the S&P 500 and Nasdaq Composite's highest closing since April 2022. In premarket trading, Oracle shares surged by 4% after surpassing Wall Street's expectations for the fiscal fourth quarter, reporting adjusted earnings of $1.67 per share on revenue of $13.84 billion.
As the rate decision is scheduled for Wednesday, the market focus now shifts to May's consumer price index (CPI) report. Economists surveyed by Dow Jones anticipate a slight easing of inflation, predicting a 0.1% month-over-month increase in prices compared to a 0.4% rise in April. On an annual basis, economists expect a 4% surge.
JPMorgan traders presented different scenarios for how the stock market could react to the CPI report on Tuesday:
- There is a 40% probability that the year-over-year CPI will fall between 4% and 4.2%. This is considered the most likely scenario by the bank's trading desk, suggesting that it would bring the market closer to achieving its goal of curbing inflation. It would also reinforce the belief that the Fed will pause in June, with the CPI report becoming more significant for the July Fed meeting. If this scenario unfolds, the S&P 500 is expected to rise between 0.75% and 1.25%, according to JPMorgan.
- JPMorgan assigns a 35% probability to the year-over-year CPI falling within the range of 4.2% and 4.4%. While this figure would confirm a downward trend in inflation, JPMorgan highlights that it would provide little support for the belief that the Fed is done with its actions. In this outcome, the traders predicted the S&P 500 would trade between breakeven and 0.5% higher.
Yesterday, the Nasdaq made an effort to surpass the resistance level near 14,680 but ultimately closed the day around the 17,780 region. Today's data will play a crucial role in determining whether the market will continue its upward trend or experience a correction. If a correction occurs, the next projected support level is anticipated to be at 14,000. However, if there is a breakout, the subsequent resistance level is expected to be approximately 15,240, which aligns with the 78.6% Fibonacci retracement level.