S&P 500 Forecast: SPX rises as oil prices fall, but treasuries remain at multi-decade highs

US futures        

Dow futures 0.4%, S&P 500 futures 0.44%  & Nasdaq futures  0.75%

European futures

FTSE 0.32%,  DAX  0.8%

• US stocks rise as oil prices ease
• US Treasury yields continue to climb at multi-decade highs
• Oil falls on hopes of US-Iran diplomacy

U.S. stocks rise, Oil falls on US-Iran diplomacy hopes

U.S. stocks are rising on Friday after a volatile week that saw a surge in Treasury yields ripple through financial markets.

The Dow is set to close for a fourth straight losing week, while the S&P 500 and Nasdaq are on track to gain.

Oil prices are falling on hopes of diplomatic progress between the U.S. and Iran to reopen the Strait of Hormuz. This is helping to ease inflation concerns after an eventful week in the bond market.

Drama was high in the bond market this week, with U.S. 10-year Treasury yields climbing to 5.225% late on Thursday, a fresh 19-year high, while the 30-year reached 5.502%, a level last seen in 2004.

The rise in yields was fuelled by hawkish comments from Fed officials, persistently high energy prices due to the Iran war and much stronger-than-expected PMI data. Markets moved to price in a 70% probability of a rate hike in October.

Looking ahead, investors will be watching University of Michigan consumer sentiment, durable goods data and further comments from Fed officials. Attention will then shift to core PCE inflation and non-farm payrolls next week for further clues over the health of the U.S. economy and the Fed's next move.

Corporate Movers

Akamai Technologies, the cloud computing company, is up over 21% after announcing a seven-year power contract and an $11.6 billion deal with Anthropic on Thursday. Akamai also issued a warrant giving Anthropic the right to buy up to 5% of the company’s shares at an exercise price of $111.33 each.

Nike is falling almost 2% after Bank of America downgraded the company to underperform from neutral, expecting sales declines from the second quarter through the rest of fiscal 2027.

S&P 500 Forecast – Technical Analysis

The S&P 500 trades above its 50- and 200-day EMAs and its rising trend line, keeping the bullish trend intact for now, provided key support levels hold.

The index has consistently struggled to move past the 7,750 area, and repeated failure to break above this level could suggest that an interim peak is forming. That said, the RSI remains above 50, keeping momentum favourable. A decisive break above 7,750 would open the door to 7,810 and potentially fresh record highs.

On the downside, support is seen at 7,625, the 50 EMA and the June high. A break below this level and 7,500, the September low, would create a lower low and bring attention to 7,300, the July 30 low.

FX Markets – Dollar falls, GBP/USD eases

The USD is easing lower on Friday but remains on track to gain around 0.8% this week, taking its gains over the past two weeks to around 2%, as hawkish Fed expectations and higher Treasury yields continue to support the dollar.

EUR/USD is rising towards 1.14 as the U.S. dollar weakens, although the pair remains down around 2% over the past two weeks on diverging ECB-Fed policy expectations. The euro is also looking past a downward revision to Q2 Spanish GDP, which came in at 2.6% annually, down from 2.7%, while German GfK consumer confidence fell by more than expected.

GBP/USD is rising towards 1.25 but remains close to a three-month low. Bank of England Governor Andrew Bailey said on Friday that the pass-through from higher energy prices remains subdued so far, but stressed that it is still early days and that persistently high energy prices could challenge the Bank of England's current rate stance.

Oil Prices Ease as Diplomatic Hopes Overshadow Houthi Attacks on Saudi Arabia

Oil prices are lower on Friday as markets weigh the possibility of diplomatic progress between the U.S. and Iran against ongoing supply concerns.

U.S. and Iran negotiations in New York continue to explore a potential way out of the war, which would involve Iran reopening the Strait of Hormuz at the same time as Washington removes its economic blockade of Iran. Reports suggest that Iran could reopen the Strait within the next seven days.

These hopes are pulling oil prices lower, even as military strikes in the Middle East continue, with Yemen-backed Houthis maintaining their assault on Saudi Arabia's oil infrastructure.

Saudi Arabia is also ramping up volumes through the East-West pipeline, which came back online this week.

Meanwhile, fears of a U.S. ban on diesel exports are also showing up in price dynamics, with the widening Brent-WTI spread reflecting the divergence between global supply risks and U.S. market fundamentals.