Biden steps aside, Trump favoured to win
US President Biden has announced he will not seek re-election and has endorsed Vice President Kamala Harris as the Democratic candidate for the upcoming November election. Harris is expected to be confirmed as the nominee at the Democratic National Convention, which begins on Monday, 19 August.
Former President Donald Trump is currently the favourite to win the election. Historically, the betting favourite has lost only twice since 1866. If Harris leads the Democrats to victory, it is anticipated that her policies would closely align with those established under Biden.
The critical question is whether the Democrats, under Harris’s leadership, can prevent a Republican clean sweep in November and maintain a divided Congress. This division could help mitigate more extreme outcomes under a potential Trump presidency. Reflecting these considerations, early Monday trading saw the US dollar marginally soften.
Focus shifts back to economic data
Recent events, including a global IT outage last Friday, raised concerns about the robustness of disaster recovery plans across major organisations. With the outage resolved, attention is returning to significant upcoming events like the second quarter (Q2) 2024 earnings reports from Alphabet and Tesla scheduled for Wednesday morning AEST, and key economic data releases this week.
Expectations are set for the US economy’s Q2 growth rate to be revealed on Thursday, with forecasts suggesting an expansion of 1.9%, up from 1.4% in Q1. The Atlanta Fed’s latest estimate even suggests a possible growth of 2.7%. Additionally, the core personal consumption expenditures (PCE) price index will be closely watched.
Core PCE inflation preview
Date: Friday, 26 July at 10.30pm AEST
In May, the headline PCE price index remained unchanged for the first time this year, keeping the annual rate at 2.6%. The core PCE price index, which excludes volatile items like food and energy, saw a minimal increase of 0.1% from the previous month, the smallest rise since November 2023. This resulted in a decrease in the annual core inflation rate to 2.6% from 2.8%.
For June, the headline PCE is expected to rise slightly by 0.1% month-over-month (MoM), potentially reducing the annual rate to 2.5%. The core PCE is projected to increase by 0.2% MoM, maintaining the annual rate at 2.6%. A 25 basis point rate cut is fully anticipated at the Fed’s September meeting, with additional cuts expected before the end of the year.
Core PCE price index MoM chart
Nasdaq 100 technical analysis
Last week, the Nasdaq 100 displayed a ‘loss-of-momentum’ candle, indicating potential market corrections ahead. A significant downturn would be confirmed if the index falls below last week’s support levels, potentially leading to a steeper decline toward established uptrend support.
Nasdaq 100 weekly chart
Nasdaq 100 daily chart
S&P 500 technical analysis
The S&P 500 recently pulled back to early support levels from mid-June. There’s potential for further declines towards the uptrend support at 5400. However, if it remains above this level, the upward trend could continue, possibly reaching and surpassing last week’s high.
A sustained drop below 5400 would indicate significant technical damage and suggest a more extensive market pullback.
S&P 500 daily chart
