(CercleFinance.com) – Wall Street should open higher on Tuesday morning on some bargain buying after five sessions of decline, although the market could continue to be uneven due to fears surrounding the health of the economy.
Half an hour before the opening, the futures contracts on the main New York indices advance from 0.9% to 1.4%, announcing a start to the session in the green.
The S&P 500, the benchmark index for American managers, has just dropped five straight declines, a series that has brought it back to annual lows, following the announcement last Wednesday of a new turn of the screw from the Fed.
In a note released in the morning, however, UBS strategists warn investors against the temptation to stay away from stock markets, even if they recognize that the current trend is not exciting.
They remind us of the little point in holding cash given the current high level of inflation and the need to remain ‘selectively’ invested in equities with a view to an upcoming market rebound.
Favorable statistics, having shown that the American industry was cashing in without too much apparent difficulty the impact of the rate hike, should help Wall Street to rebound on Tuesday.
The Commerce Department this morning reported a 0.2% drop in new orders for industrial capital goods last month, largely due to a drop in demand for transportation equipment.
Orders for durable goods excluding aeronautics, a closely followed barometer of corporate investment projects, rose by 0.2%
This figure is a small glimmer of hope after the series of disappointing statistics of the last few days and confirms the possibility, however slim, of a ‘soft landing’.
Investor sentiment remains fragile, however, and many analysts are anticipating a further decline in the S&P 500, which has already lost 23% this year, in the face of rising rates and signs of slowing growth.
The index could thus come to test the zone of 3000-3200 points, according to the worst possible scenario envisaged by analysts at Raymond James.
Goldman Sachs has lowered its end-of-year target for the S&P 500 index to 3,600 points from 4,300 points so far.
In the context of a rebound in equities, the VIX CBOE volatility index, also known as the fear index, fell 3.2% to 31.2 points, while bond yields fell a little.
The 10-year Treasuries rate thus returned to around 3.85% after hitting a multi-year peak of more than 3.90% yesterday.
In terms of indicators, the session will be marked by the publication of new home sales and the Conference Board’s consumer confidence index.
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