S&P 500 outlook: Markets remain buoyant ahead US Jobs Data

• S&P 500 outlook: Index hovers near record highs, keeping bulls in charge
• All eyes on today’s US jobs report for the next directional cue on interest rates
• Trade tensions could resurface with Trump’s 9 July tariff deadline

 

With US stocks continuing their impressive rally, marching to new records this week, the S&P 500 outlook remains upbeat. Sentiment has been buoyed by a rally that’s been gathering pace since early April. A temporary truce in Trump’s tariff threats and a sharp cooling of tensions in the Middle East set the tone for risk appetite to rebound — and rebound it has. Yet, despite the bullish sentiment, investors are now eyeing a potential turning point. With the July 4 holiday approaching and Wall Street shutting early today, attention has turned squarely to today’s US non-farm payrolls data — the next big piece in the interest rate puzzle – due for release shortly.

 

US jobs data takes centre stage

 

Rate cut speculation has provided fertile ground for equity gains, but the Federal Reserve’s policy stance remains cautious. Fed Chair Jerome Powell continues to stress that inflation is proving stubborn, and the labour market remains tight enough to justify keeping rates mildly restrictive for a while longer.

However, that could change rapidly if today’s employment figures come in on the soft side. The current market pricing suggests a 1-in-4 chance of a rate cut at the July meeting. A weaker-than-expected print could see that probability surge — and with it, renewed bullish momentum in equities – unless we see a large negative figure, in which case recession alarm bells could go off.

 

What’s expected from the NFP?

 

The consensus forecast is for a 110,000 increase in non-farm payrolls, but recent data has been less than convincing. The ADP private payrolls figure released yesterday registered its first decline in over a year, stoking concerns that today’s number might fall short of expectations — potentially even slipping below 100K.

On the unemployment front, a slight uptick to 4.3% is anticipated, up from 4.2%, while Average Hourly Earnings are seen rising 0.3% month-on-month vs. 0.4% increase the month before.

 

How might markets react?

 

It’s a tricky one. A modest jobs report that meets or just slightly misses expectations could be the ideal scenario for risk assets — enough to keep rate cut hopes alive without sounding alarm bells over recession risks.

A sharply weak report, on the other hand, might accelerate expectations for monetary easing, but also dent confidence in the economic outlook — a scenario that equity markets might struggle to digest.

And should the data come in very strong? Well, that would likely extinguish any lingering hope for a July cut, and we could see a bout of profit-taking — especially ahead of the US public holiday.

 

Tariff risk lurks on the horizon

 

Beyond today’s economic data, there’s a political timebomb ticking in the background. On Wednesday 9 July, the deadline for key trade negotiations expires. Should trade talks don’t result in actual deals or at least an agreement to extend talks, President Trump may well dust off the tariff rhetoric — a move that could upset the recent calm and cloud the broader S&P 500 outlook.

 

Technical S&P 500 outlook: Key levels to watch

 

There’s no denying it — the S&P 500 is in a strong uptrend. For now, the technical picture firmly supports a bullish stance. Most strategies are sticking to the long side, and with good reason: attempting to short this rally doesn’t quite stack up from a technical point of view, even if things appear slightly overheated. The Relative Strength Index (RSI) is hovering around 73, nudging above the typical overbought threshold of 70, which may give some traders pause.

 

That said, blindly chasing every breakout isn’t advisable. The smarter play remains buying into dips, as long as price action continues to carve out higher highs and higher lows.

 

 

In terms of key levels to watch on the US SP 500 index, which is based on the underlying S&P 500 futures, here are the ones that matter the most in our view:

 

• Initial short-term support sits around 6,211 — Tuesday’s high that was broken by yesterday’s outside candle
• Major support lies deeper, in the zone between 6,100 (December’s peak) and 6,148 (February’s high), both previous record levels.
• Below that, 6,000 stands out — the level that marked the breakout after the Middle East ceasefire news.

 

To the upside, there’s no historical ceiling in play. That means round numbers — such as 6,300, 6,400, and beyond — could become natural targets for bullish momentum to test next.

 

In Summary, then, the S&P 500 outlook remains supported for now at record highs. But its trajectory now hinges on the tone of today’s NFP report and what it implies for Fed policy. With trade risks simmering beneath the surface, things could change next week, with potential for heightened volatility around Wednesday.

-- Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R