E-mini S&P 500
Analysis Fundamental Analysis

E-mini S&P 500 (ES) Extending Gains Ahead of Retail Earnings

  • Investors are optimistic that the Fed will achieve its inflation target without hurting the economy.
  • Prices are climbing as investors await retail earnings from the US.
  • Markets barely reacted to China’s poor economic data.

The E-mini S&P 500 (ES) futures went up as mega-cap growth shares extended the market’s recent rally amid investor optimism that the Federal Reserve can achieve a soft landing for the economy.

“Market participants are looking at the Fed and saying, ‘Hey, they’re going to be cutting rates here sooner than we know, and that’s going to be good for the equity market,'” said Paul Nolte, portfolio manager at Kingsview Investment Management in Chicago.

US stocks surged as traders prepared for a big week for retail earnings as the Wall Street boom continued. The S&P 500 rose 0.4% to 4,297.14.

Since July 1, S&P 500 companies’ projected earnings growth for the second quarter has improved, and news from American businesses has largely surprised investors, who had been preparing for a more pessimistic outlook on both businesses and the economy.

Stocks fell at the start of the session, with the oil and financial sectors leading the way before turning around to close higher. Consumer discretionary, communication services, and consumer staples increased while Tesla propelled the technology into the black.

The moves were made despite unimpressive economic data from China, where the central bank unexpectedly slashed interest rates, raising doubts about the country’s ability to recover economically.

“I think this market is doing a really good job of making a lot of people feel very uncomfortable,” said Truist’s Keith Lerner. “The way the market’s trading, it’s already been braced for bad news, so once it gets it, it doesn’t hurt the market because it’s already prepared for it.”

The S&P 500 has completed its fourth consecutive one-week winning streak, the benchmark’s longest winning streak since 2021. Since mid-June, the S&P 500 has experienced a rapid recovery, which was aided last week by indications that inflation may have peaked in July. Since December 31, the benchmark has plummeted by around 10%. However, the bullish trend might continue.

Looking at the chart below, the S&P 500 has never formed fresh lows after hitting 50% retracement. The index has been maintaining the trend since World War ll. The index hit its lowest price in June 2022 and has been in recovery mode since then.

S&P 500 futures positive signal (Source: Refinitive Datastream

This week, investors are watching the profits of major retailers like Home Depot, Walmart, and Target to gather more information about how inflation has affected the operations of these companies.