US Durable Goods Orders Data Lifts the S&P 500, But Headwinds Remain

US Durable Goods Orders for May 2020 staged a rebound, coming in at 15.8% as opposed to the 10.3% that was expected and the -17.7% registered for April 2020, which ordinarily should have been good enough to spur the S&P 500 into a positive mood. The 0.3% gain presently being seen in the S&P 500 index shows that investors are pleased with the report, at least for the time being. 

Only the orders from aircraft makers and car makers made any appreciable gains. Orders for automobiles rose 28% after a 2-month decline. Aircraft maker Boeing saw no new orders in May, as opposed to the four orders the company received in April. However, there were no cancellations of aircraft orders, which effectively stemmed the bleeding from that angle. 

The S&P 500 holds several companies which depend on durable goods for their operations, and an increase in orders is a sign that some of these companies (such as airline stocks) are gradually getting back into business. 

However, the struggles for these companies are far from over, and rising coronavirus cases could bring the lockdowns back again, even though US officials such as White House Adviser Larry Kudlow have consistently maintained otherwise. Furthermore, analysts are not expecting aircraft orders to attain the pre-coronavirus levels for at least a year. This recovery in itself depends on the return of passenger traffic to considerable levels.

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Outlook for S&P 500 Index

Today’s candle bounced from the support zone, which has 2961.4 and 3028.3 as its upper and lower barriers. This bounce has allowed the S&P 500 dash 3070.8 in an attempt to retest that price level. A breakout above this price brings 3137.0 into focus. Only a price advance beyond 3228.4 restores the hopes that an uptrend could continue as this would form a higher high. 

On the flip side, the arrest of the advance at 3070.8 or 3137.0 reinforces the failure of the upswing. This may yet indicate that the recovery may have stalled. However, only a breakdown of the support zone’s floor at 2961.4 allows the selloff to resume, targeting 2844.3 and possibly 2707.7. 2793.4 (50% retracement from the February 2020 high to the March 2020 low) may form an intervening support target. 

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