S&P 500 and Nasdaq 100: Market Pulls Back Today but Weekly Gains Remain Intact

Stock Futures Dip as Rally Momentum Eases

Stock futures edged lower Friday morning as investors prepared to close a week marked by a strong recovery rally. Despite this slight pullback, major indices remain on track for significant weekly gains, driven by optimism around better-than-expected economic data and easing recession fears.

Strong Week for Major Indices

The Dow Jones Industrial Average has surged over 2% this week, heading into Friday’s session, while the S&P 500 and Nasdaq Composite have climbed roughly 3% and 5%, respectively. Thursday’s session saw robust gains, with the Dow adding more than 500 points, or 1%, and the S&P 500 rising 1.3%. The Nasdaq outperformed, jumping 2.1% as tech stocks led the charge. This marked the sixth consecutive winning day for both the S&P 500 and Nasdaq, positioning them for their strongest weekly performance since November. The Dow is also on pace for its best week of the year.

Economic Data Fuels Optimism

The rally has been supported by upbeat economic reports, including stronger-than-expected retail sales and a decline in weekly jobless claims. These indicators have alleviated concerns about a potential recession, which had triggered a global sell-off earlier in the month. Inflation data released earlier in the week further bolstered hopes for a “soft landing,” fueling speculation that the Federal Reserve might start cutting interest rates as soon as September.

Corporate Earnings Drive Pre-Market Moves

In pre-market trading, several stocks are making headlines. Estee Lauder slipped nearly 2% after Bank of America downgraded the stock, citing challenges in the Chinese market and softening U.S. demand. Applied Materials dipped 1.8% despite posting better-than-expected earnings. Conversely, JD.com shares rose 3% following a strong earnings report, while Microchip Technology gained 2.4% after an upgrade from Piper Sandler. Bayer surged over 11% after winning a significant legal victory related to its Roundup product.

Housing Market Shows Continued Weakness

Housing market data released Friday highlighted ongoing challenges. The Commerce Department reported that housing starts fell to 1.238 million in July, a 6.8% decline from June and the lowest level since June 2020. Building permits also dropped, signaling continued pressure on the industry from elevated interest rates.

Market Forecast

As the week draws to a close, the market’s upward momentum appears poised to continue, albeit with some caution. The robust economic data and strong earnings reports suggest a bullish short-term outlook, but lingering concerns over interest rates and housing market weakness could temper gains. Investors will likely remain focused on upcoming economic reports and Federal Reserve signals for further direction.

Technical Analysis

E-mini S&P 500 Index futures are drifting lower on Friday as sellers return, with the index approaching the key resistance at 5600.75, the last barrier before the record high of 5721.25.

On the downside, key support lies at the 50-day moving average of 5514.00. While initial tests of this level are likely to attract buyers, a failure to hold could lead to a significant drop, potentially breaking down to the pivot point at 5420.50.