S&P 500 OUTLOOK:
- The S&P 500 falls amid elevated geopolitical tensions in Eastern Europe
- Sentiment remains fragile on Wall Street as the crisis in Ukraine drags on for another day
- Investors’ attention will turn to the February NFP report on Friday
It was another wild day on Wall Street loaded with volatility amid rising tensions surrounding the tragic military conflict unfolding in Ukraine. Against this backdrop, U.S. stocks opened mostly in positive territory, but reversed sharply lower in the afternoon trade as the crisis in Eastern Europe dragged on for a seventh day unabated. In fact, President Putin appears to be doubling down on his war of aggression, rejecting the idea of ceasefire without demilitarization of Ukraine, a non-starter for the West.
When it was all said and done, the S&P 500 tumbled 0.53% to 4,363, failing to build on the powerful rally from the previous session, a sign that geopolitics continues to constrain bullish sentiment and dominates price action.
At this point, it is hard to predict how the situation will play out, but an escalation of the crisis could push oil prices even higher than they are today, exacerbating inflationary pressures and strengthening the case for aggressive monetary tightening at a time when the U.S. economy is already cooling. Obviously, this is a bad outcome for stocks.
Aside from geopolitics, traders should also keep an eye on incoming macro data for clues on the health of the U.S. economy. On that note, tomorrow’s NFP numbers will be of great importance. Investors expect the employment survey to show an addition of 400,000 jobs in February, but an upside surprise should not be ruled out following ADP’s strong print. A robust result may ease Wall Street’s concerns about the slowdown, providing some respite for stocks and acting as a short-term bullish catalyst, provided we don’t start the session on risk-off mode.
S&P 500 TECHNICAL ANALYSIS
After failing to decisively break above Fibonacci resistance near the 4,387 area, the S&P 500 pivoted lower as bears resurfaced amid fragile market sentiment. If selling activity intensifies ahead of the weekend, the first technical support to consider lies at 4,280 and then 4,225. If both of these areas are breached on the downside, traders are likely to begin dumping risk assets and head for the exits, setting the stage for a potential retest of the 2022 low.
Alternatively, if the S&P 500 reclaims 4,387 and manages to rise above the 4,400 psychological level, buying interest could pick up, creating the right conditions for a move towards cluster resistance at 4,470. If this ceiling is invalidated, the index could be on its way to attack 4,550.
S&P 500 TECHNICAL CHART
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—Written by Diego Colman, Contributor