US Session: Positive Sentiment Before Debate and Inflation Data Tomorrow

US Stock Futures Rise in Premarket Before Key Period

US stock futures are up in the premarket before a crucial period, which includes important inflation data on Wednesday, followed by interest rate decisions from both sides of the Atlantic. S&P 500 futures have recovered earlier losses, trading up by 0.38%, after the main index rose by 1.2% on Monday, bouncing back from the worst start to the month since 1953. Nasdaq 100 futures are up by 0.43%. US government bond yields remain steady.

Market sentiment is cautious as investors balance concerns about a US recession with the likelihood of a soft landing, amid fears that the Federal Reserve may be lagging behind trends while the labor market cools. Traders will be watching consumer price data for further clues about the pace of rate cuts from the Fed, with some strategists calling for an accelerated easing pace. Even a slight disappointment from upcoming economic reports could trigger significant selling, wrote Rebecca Cheong, top equity derivatives strategist at UBS AG, in a client note on Tuesday. She expects the S&P 500 to fall by at least 10% from its peak within a month. She recommends investors to buy hedging strategies through ETFs to protect against losses.

Political risk in the US is also in focus as former President Donald Trump faces Vice President Kamala Harris in a debate later on Tuesday. The outcome could impact the markets, with tariffs, trade policy, and taxes being key points of discussion. Hedge funds have been selling positions to raise cash for volatility before the November 5 elections, according to Goldman Sachs Group Inc. The European Central Bank’s meeting later this week is also weighing on risk appetite. The bank meets on Thursday and is expected to announce a second interest rate cut this year to address the slowing economy. Morgan Stanley forecasts that the euro will fall to parity with the dollar within months. Among individual stocks, Apple shares are trading down by up to 1.5% in premarket trading after the company lost its court battle over a €13 billion ($14.4 billion) tax bill in Ireland. The iPhone 16 launch received lukewarm reactions from investors as many features had leaked beforehand.

Technical Picture: S&P 500 Futures Daily

I expect the price to test the psychological resistance around 5,500. If it breaks above this level, the price will likely test the 23.6 FIBO level of the last uptrend and the 65 SMA around 5,535.

Alternatively: If the price breaks below the 38.2 FIBO level of the last uptrend around 5,460, it will likely test the 50.0 FIBO level of the last uptrend around 5,400.