Trade risks and inflation are adding to downward pressure on S&P 500

The S&P 500 index is showing a decline, losing 0.6% on Monday amid escalating trade risks following US President Donald Trump's statements on tariffs. Expectations of new tariffs of 25% on cars and auto parts, as well as possible retaliatory measures from the European Union and other trading partners, are increasing fears of a recession in the United States.

Goldman Sachs estimates that the probability of a recession in the US now stands at 35%, up from 20% previously. JPMorgan estimates this risk even higher, at 40%.

Additional pressure on the stock market is being exerted by inflation data. The personal consumption expenditures figures published on Friday exceeded forecasts, while investors' inflation expectations for the year, according to the University of Michigan, rose to 5%. This increases the likelihood of a more hawkish stance from the Federal Reserve (Fed), limiting the possibility of monetary policy easing.

The key events for the stock market this week will be Friday's US labor market data. A forecasted growth of 140,000 jobs is seen as a critical benchmark. A weaker-than-expected result would only heighten fears of a recession and could trigger a further decline in the S&P 500. Additionally, Fed officials, including Jerome Powell, are scheduled to speak this week. Any hints of a shift in the Fed's rhetoric amid a slowing economy could become a driver of volatility in the stock market.

From a technical perspective, the S&P 500 index continues to exhibit downward momentum on the daily chart (D1). The wave structure suggests the formation of the third downward wave on the H8 timeframe. Bear and Bull Power indicators show a strengthening of negative dynamics, confirming the bearish sentiment in the market. A break below the top of the first wave at 5505.00 would reinforce the downward trend.

Signal:

The short-term outlook for the S&P500 suggests selling.

The target is at the level of 5260.0.

Part of the profit should be taken near the level of 5420.0.

The stop-loss could be placed at the level of 5790.0.

The bearish scenario is short-term, so a trading volume should not exceed 2% of your balance.