US open: Stocks rise as GDP & jobless claims beat forecasts

US stocks are heading higher for a second day as investors digested the latest data and looked toward the Federal Reserve’s annual Jackson Hole Symposium.

US GDP was upwardly revised to -0.6% annualized in Q2 up from -0.9% in the initial estimate and ahead of the -0.8% forecast. Although this still shows that the US economy was in a technical recession.

Meanwhile, US jobless claims unexpectedly fell to 243k down from 250k in a sign that the US labour market is holding up despite the US economy being in a technical recession and despite rising inflation.

The central bankers’ gathering kicks off later today and while some clips will be coming through to the market the main focus in on Jerome Powell’s speech tomorrow, which comes just an hour and a half after the latest PCE inflation data.

Powell’s speech will be watched closely and will likely set the tone in the markets until the next FOMC. Heading not the speech inflation is still over 4 times the Fed’s target level so we can expect a reiteration of the Fed’s commitment to cutting inflation. The Fed’s job is clearly not done yet.

Expectations of a dovish pivot have been priced out earlier in the week. The risk could be that the Fed is prepared to go bigger for longer.

In corporate news:

Peloton falls 16% pre-market after the exercise bike manufacturer reported a larger than expected net loss in Q4. Rising costs, slow progress in the turnaround and falling demand are hitting the stock.

Tesla rises pre-market after the 3-for-1 stock split. This is the second time that the EV maker has split its stock in 2 years.

Nvidia reports a 19% QoQ drop in revenue mainly due to a slowdown in demand for gaming chips.

Where next for the S&P500?

The S&P500 ran into resistance at 4300 the 200 sma before rebounding lower and finding support at 4100. The price trades caught between the 100 and 200 sma and the RSI is relatively neutral. Sellers will be looking for a move southwards of 4100 horizontal support and 4070 the 100 sma. Buyers will look for a move over 4300 to extend the upside recovery and create a higher high.

FX markets – USD falls, AUD jumps

The USD is falling as risk sentiment continues to improve. The USD had rallied to 109.27 in the previous session matching its 20-year high touched at the start of July as hawkish Fed bets built ahead of the Jackson Hole Symposium.

EUR/USD is rising boosted by better-than-expected data from Germany. German GDP was upwardly revised to 0.1% QoQ in Q2, from 0%. Meanwhile, the German IFO business climate was also better than forecast at 88.5, down from 88.7. However, this is still only marginally above a 2-year low. The ECB minutes didn’t bring anything new to the table.

AUD/USD is outperforming its major peers, boosted by the upbeat market mood and announcement of a huge stimulus plan in China, equating to around 1% of GDP to support the slowing economy.

Oil prices are holding steady after strong gains across the past two sessions. On the one hand, oil prices are being supported by the prospect of OPEC cutting oil supply. However, this is being offset by the possibility of Iranian oil returning to the market should the Iran nuclear agreement be revived.

Earlier in the week the Saudi Energy Minister surprised the market by suggesting that a production cut could help stabilize the market. His comments lifted oil prices to a three-week high and reduced the odds of oil prices slipping below $90 in the near term.

A larger than expected draw on crude stock piles is also supporting the price. According to the latest EIA data, stockpiles declined by 3.3 million barrels.