US stocks look to recover into the weekend; More soft US data

Summary:

• US benchmarks trading higher ahead of the open

• Trump trade comments support the recovery

• Durable goods orders disappoint

After some pretty heavy selling yesterday, US stock markets are set to start higher this afternoon as equities have moved off their lows. The recovery can be attributed in part to comments from the US president after Trump told reporters late on Thursday that he expected the ongoing trade war with China to end swiftly. While these remarks are vague and could well amount to little more than lip-service they have boosted sentiment and all the major US indices are trading in the green ahead of the Wall St. open.  

An unexpectedly soft US manufacturing release yesterday saw a bad session turn worse for the markets and the last significant data point of the week has done little to improve things on this front. For April durable goods orders came in worse than expected with a M/M decline of 2.1% vs -2.0% expected. The core reading didn’t look too bad on the face of it, with a print of 0.0% vs +0.1% consensus forecast, but this appears worse when the downward revision to the prior is taken into account to now stand at -0.5% after +0.2% initially.

Durable goods orders continued to decline last month, with this widely followed metric on consumer spending turning negative in Y/Y terms. Source: XTB Macrobond

There’s similar patterns developing in all the large cap US indices with a potential head and shoulders forming across the S&P500, Nasdaq and Dow Jones. Thursday’s lows saw the key supports hold in all these markets however, and unless there is a break below the neckline then the downside is limited. The markets are still trading in the red for the week and this final session could well be pivotal in how they end it and therefore have a say in what comes next.

25220 is key support and a potential neckline in a S-H-S formation for the Dow Jones Industrial Average. 26070 potential resistance. Source: xStation