US stock market indexes have, since the release of the July inflation report, garnered greater optimism from investors, now further driven by the current slowing of the Chinese economy, the world’s second biggest.
The slowdown in Consumer Price Index (CPI) in July pushed the 12-month inflation rate to 8.5 per cent, down 0.6 per cent from the previous figure, according to the US Bureau of Labor Statistics.
The result of the Federal Reserve raising its key interest rate to curb rising inflation also caused the main US stock indexes to increase sharply the day the CPI was released.
For example, the Dow Jones Industrial Average was up 1.63 per cent, the S&P 500 2.13 per cent, the highest since May, with the Nasdaq Composite up 2.89 per cent, a new high since the end of April.
As of Tuesday, the three were up 0.45 per cent, 0.40 per cent and 0.62 per cent, respectively.
“The market is still strong on the bullish side for this week,” said Long Samnang, business manager at PP Link Securities, adding that with the force of the fundamentals regarding the slowdown of China’s economy, the market is sending a clearer signal to long US stock.
Reuters reported “grim” figures from China.
“China’s central bank cut key lending rates in a surprise move on Monday to revive demand as data showed the economy unexpectedly slowing in July, with factory and retail activity squeezed by Beijing’s zero-Covid policy and a property crisis.
“The grim set of figures indicate the world’s second-largest economy is struggling to shake off the June quarter’s hit to growth from strict Covid restrictions, prompting some economists to downgrade their projections,” Reuters said.
DAILYFX.com reported: “The first two weeks of August have clocked gains for US equity markets, in line with historical tendencies.
“Seasonality studies going back 20 years show August is generally positive, with the second half of the month producing the majority of gains during the month, per data gathered from EquityClock.com.”
For this week’s trading recommendation, specifically for the S&P 500, investors and traders should buy at $4,247.60, setting a take-profit function at $4,306.00 and a stop-loss at $4,204.00.