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  • Weekly Summary: Microsoft and Alphabet Repel Stagflation Phantom

Weekly Summary: Microsoft and Alphabet Repel Stagflation Phantom

S&P 500 broad market index futures surged by 2.5% to 5088 points, a notable acceleration from the 0.4% increase observed on Thursday. This rise followed robust Q1 2024 earnings reports from Microsoft (MSFT) and Alphabet (GOOG).

Prior to the publication of these earnings, investors had some apprehension due to weak PMI data released in the United States. However, their concerns were somewhat alleviated by strong earnings results. Despite this positive news, the US Q1 GDP unexpectedly dropped to 1.6% QoQ, well below the forecasted 2.5% QoQ and marking the lowest reading since Q2 2022. This downturn in economic growth, coupled with a rise in the PCE index to 3.7% (above the consensus of 3.4%), suggests a rapidly deteriorating American economy with increasing inflation—a combination reminiscent of stagflation last seen in the 1970s.

The stellar performance of Microsoft and Alphabet came at an opportune moment. Both companies significantly surpassed consensus expectations, with Alphabet even announcing its first-ever dividend of $0.20 per share and initiating a $70 billion buyback. This news propelled MSFT stocks to increase by 3.9% to $414.5 per share, while GOOG stocks surged by 11.2% to $175.50.

Investors are now eagerly awaiting the release of the March PCE index to gain insights into recent developments in consumer spending. Strong corporate earnings could offset any negative reaction if March numbers surpass expectations. Conversely, PCE numbers below forecasts could be balanced by expectations for the next Fed meeting scheduled for next week. Overall, investors are seeking clarity on potential adjustments to their stock positions in May and June.

From a technical perspective, the S&P 500 index continues to move within a downside formation with a target at 4800-4900 points, with extreme downside targets at 4400-4500 points. Resistance is seen at 5090-5110 points, and if the correction persists next week, a downside scenario with extreme targets may become the baseline trend.

Oil prices are currently consolidating within the range of $87.00-92.00 per barrel of Brent crude, with the path to $100 per barrel currently blocked. Downward pressure is expected to continue until mid-May, with support located at $81.00-83.00 per barrel.

Gold prices, having reached mid-term upside targets at $2000-2100 per troy ounce and extreme targets at $2400-2500, remain intact. However, consolidation is expected as prices are already quite high. The nearest support is at $2290-2310, with resistance at $2390-2410 per ounce.

The Greenback is retreating, with the EURUSD recovering to 1.07500. Despite weak macroeconomic data in the United States, the EURUSD is still heading towards 1.05000.