S&P 500; US Indexes Fundamental Daily Forecast – Trade Issues Won’t Be Major Concern Unless It Involves China

The major U.S. stock indexes opened higher on Monday as investors shrugged off warnings about a potential global trade war and decided instead to focus on positive news like Friday’s better-than-forecast U.S. Non-Farm Payrolls report.

During the pre-market session, the blue chip Dow was trading over 100 points higher on top of Friday’s more than 200 point gain. The tech-based NASDAQ Composite and benchmark S&P 500 Index are also pick-up where they left off at the end of last week.

To recap the events from Friday, the government reported that the economy added 223,000 jobs in May, more than the 188.000 median forecast. The unemployment rate fell to 3.8% and the most-important average hourly earnings jumped by 0.3%.

The jobs report solidified the Fed’s June rate hike and increased the chances of perhaps as many as two more rate hikes later this year.

Forecast

Based on the early price action, the tone of the market today is likely to be determined by technical momentum since there aren’t any major reports on tap. Traders will get the opportunity to react to the minor April factory orders report, but this is not likely to change the strong upside momentum, or the trend.

Although traders appear to be taking a positive attitude into the market at the start of the trading day, there are some pessimists who believe gains could be limited because of continued concerns over trade.

Last week, the Trump Administration announced tariffs on steel and aluminum against Canada, Mexico and the European Union. Canada’s and Mexico’s retaliation against the move seems to have been discounted already based on today’s price action. The EU response could generate a more pronounced negative reaction.

The latest round of U.S-China trade talks ended last week with no major breakthroughs to speak about. However, investors must feel that as long as they are talking, there shouldn’t be anything to worry about.

However, it should be noted that the last week’s talks ended with China threatening that previous trade agreements negotiated by the major global economies “will not take effect” if the U.S. administration goes ahead with a planned tariff increase.

Look for today’s early upside momentum to continue as long as there aren’t any new negative developments over trade.