S&P 500 & Crude Oil are climbing together this week

The US stock market has concluded that the worst of the conflict in the Middle East is behind us. Oil prices have not skyrocketed, and the rise has not triggered a global recession. Hostilities have given way to a ceasefire, and the parties are moving towards a diplomatic settlement of their disputes. So, it is time to put geopolitics aside and focus on fundamentals. Expectations of strong corporate earnings reports and attractive company valuations have catalysed the S&P 500 rally.

At first glance, the surge in the US stock market was driven by the success of a handful of large-cap companies.  When the broad stock index hit a new October high, only 11 S&P companies reached 52-week highs. In the 2021 bull market, around 90% of issuers were trading above their 200-day moving averages. Now, only 60% are.

Nevertheless, the market always follows the leaders. This is likely to manifest as increased trading volumes in US shares. In April, these volumes were 11% below their average levels over the past six months. In March, by contrast, against the backdrop of the escalating conflict in the Middle East, they were 9.5% higher.

The FxPro Analyst Team

#USSPX500

7126.72 +0.30%

BRENT

100.631 -0.33%

WTI

95.321 -0.31%