The S&P 500 remains supported by positive macro backdrop, but downside risks linger

Macro Overview

The S&P 500 has rebounded from monthly lows, with improved risk sentiment. However, this move lacks a real catalyst, as the market continues to trade in a range amid uncertainty stemming from macro and geopolitical factors. A recent US Supreme Court ruling on tariffs introduced short-term uncertainty, but did not significantly change the landscape since Trump quickly reimposed new tariffs under different laws. This approach reduces effective average tariff rates, providing a marginally positive effect. In terms of Fed interest rate expectations, the market currently prices in 54 bps of easing by year-end. However, this may face risks of a hawkish adjustment if US labor market data continues to improve. Fed officials have hinted at holding rates steady if strong job data is repeated, making the upcoming report crucial.

Technical Analysis

On the daily chart, the S&P 500 has rebounded towards all-time highs. If it reaches there, sellers might engage with defined risks above the highs, aiming for a drop back to the 6,760 support level. On the 4-hour chart, a strong support zone is evident around the 6,930 level. A pullback could see buyers stepping in here, while sellers would look for a break lower to target 6,760.

Upcoming Catalysts

Market participants will be focused on today's third round of US-Iran talks and the figures for US Jobless Claims. Tomorrow wraps up the week with the US PPI report, which could influence market dynamics.