Why This Week Is Pivotal for the Markets

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Part 2
Why This Week Is Pivotal for the Markets PART 2 OF 7

Large Speculator Positions on the S&P 500 Index Last Week

S&P 500 Index back in a positive zone

In the week ended March 9, 2018, the S&P 500 index closed at 2,786.57, rising by 2.4% after President Donald Trump turned flexible with his tariffs, allowing concessions for Canada and Mexico. The decision to introduce tariffs unnerved markets and generated resistance from domestic and international trade bodies, and President Trump’s softened stance allayed any fears about a global trade war, resulting in the equity rally on March 8. Subdued average hourly wages growth in the February jobs report also added to the increase in risk appetite.

All the sectors within the S&P 500 Index registered gains last week, with S&P 500 industrials (XLI) gaining close to 4.4% after the concessions for Canadian and Mexican steel (SLX) and aluminum imports were announced. The financials (XLF), technology, materials, and real estate sectors have also gained more than 4% over the last five sessions.

Large Speculator Positions on the S&amp;P 500 Index Last Week

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Speculators positions on S&P 500 Index

Large speculators of the S&P 500 Index have decreased their number of net bullish positions for a second consecutive week. The number of net long contracts decreased from 13,000 to 12,000 contracts. These data were reported by the Commodity Futures Trading Commission (or CFTC) through its weekly Commitments of Traders (or COT) report. The data only reflect up to March 6, 2018, and the pre-announcement of US tariffs on steel and aluminum imports on March 8.

Investor positions are likely to turn positive this week as fears of a trade war and rising wages, which dragged risk appetite lower, have been allayed for now. ETFs that track the S&P 500 Index, such as the SPDR S&P 500 ETF (SPY) and the iShares S&P 500 ETF (IVV), have increased in value in the previous week and could witness further inflows aided by increased risk appetite.

The outlook for the S&P 500 Index

There’s one last risk event for equity markets before the FOMC (Federal Open Market Committee) meeting on March 21–22. The February inflation report is scheduled to be released on March 13, and a positive surprise in the inflation rate could stall the current equity rebound. A higher inflation rate could force the Federal Reserve to act sooner than expected, which could lead to higher rates and lower profit margins for businesses.

Apart from the inflation report, US February retail sales, the PPI (Producer Price Index), and industrial production and manufacturing production data are due to be reported, but the key focus will be the inflation report on the day.


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