US STOCKS: Big Bounce As Equity Traders Focus On Rate Cuts, Ignore Growth Angst

The ESU5 overnight range was 6279.25 - 6370.00, Asia is currently trading around 6362. The ESU5 contract found good demand around the 6250 area, its first level of support and bounced strongly overnight. The market seems to be concentrating on the potential rate cuts coming and ignoring the worries about growth that would make the cuts possible for now. This morning has seen US futures open a little higher, ESU5 +0.11%, NQU5 +0.15%. The broader market also saw good demand across the board, Dow Transports +1.06% , Regional US Banks +1.31%, Russell +2.10%. Price bounced strongly off its first support around 6200/6250, I suspect bounces back towards 6350/6400 should now initially find sellers. A break below 6200 is needed to potentially signal a deeper correction back to the 5900/6000 area.

• Lance Roberts(RIA) - “The market appears vulnerable to additional downside pressure soon, especially if upcoming economic data (like ISM Services and productivity reports) disappoint. However, unless selling accelerates through key support at the 50-day moving average(6150), this pullback could ultimately serve as a reset for an overbought market.”
• Michael A. Arouet on X: “Eye-opening chart, S&P 490 has had no earnings growth since 2022. Is the economy really strong?” See Fig.1 Below.
• David Rosenberg on X: ”The virtual stalling-out in payroll growth in the past three months has been a recession predictor with 100% accuracy over the past six decades. Score a win for Bowman and Waller, whose crystal balls are clearer than the rest of the FOMC pack."
• ISABELNET on X: “Systematic strategies have increased their equity exposure to the 84th percentile, while discretionary investors have lowered theirs to the 30th percentile, highlighting a significant divergence.” 
• Bloomberg - “S&P 500 earnings are crushing 2Q expectations -- up 9.1%, triple the preseason forecast and the strongest beat rate since 2021. But now, with stocks near all-time highs, the question is whether this recovery still has legs. Profit growth, which peaked at about 13%, is expected to decelerate to 6.8% in 3Q and 6.7% in 4Q and then pick up again into early 2026. Management sentiment is at an eight-year high, yet guidance tells a more cautious story with concerns about tariffs and rising costs.”

Fig 1: S&P 490 Vs Top 10

Source: MNI - Market News/@MichaelAArouet/SocGen