S&P 500 broad market index futures edged
up by 0.3% to 5143 points, driven by positive expectations in the absence of
major economic events this week. Investors appear to be pausing to assess their
next moves in the midst of a tense market environment.
The U.S. labour market report for April fell
significantly short of expectations, with Nonfarm Payrolls at 175,000 compared
to the anticipated 238,000. Unexpectedly, the unemployment rate edged up to
3.9%, while average hourly earnings slowed to 0.2% MoM from March's 0.3%. The
dovish message from the Federal Reserve (Fed) last week seems justified in
light of this data, prompting a pronounced reaction in the U.S. debt market,
with 10-year Treasuries yields dropping to 4.46% by the end of last week. Bets
on interest rate cuts by the Fed in September hover around 48.8%, with little
expectation for earlier cuts.
Despite the upside opportunity presented by
the 1.0% jump in the S&P 500 index following the weak labour market report,
investors are still pulling away from stocks. The SPDR S&P 500 ETF Trust
(SPY) reported net capital outflows of $3.1 billion last week. However, the
S&P 500 index has restored its upside technical formation, with 5250-5350
as the primary upside target, potentially updating recent all-time highs.
Investors may be hesitant to embrace a
potential new wave of the stock rally, perhaps due to skepticism or concerns
about forthcoming challenges. The continuation of net capital outflows from SPY
despite the rise of the S&P 500 index would confirm this cautious
sentiment.
There are
no major macroeconomic releases this week. Many Fed officials would orchestrate
market moments this week starting with Richmond Fed President Tom Barkin and
New York Fed President John Williams on Monday. Neel Kashkari form the Minneapolis
Fed will step over on Tuesday followed by Fed Governor Lisa Cook on Wednesday.
The last piece of this composition will be made by Fed Governor Michele Bowman
on Friday. This composition could be both hawkish to balance dovish messages
last week or either neutrally dovish to highlight the message. The other core
component is declining borrowing costs. Fed officials rhetoric could affect interests
rates to some extent, but April inflation numbers next week will play a key
role in this play. Lower inflation could send the S&P 500 index up to
update its records.
Bank of
England is likely to follow Fed’s dovish rhetoric on its meeting this week.
Macroeconomic data that will be released is unlikely to disturb an existing
market landscape. More than 80% of companies listed in the S&P 500 index
have already delivered their Q1 earnings reports. In fact their profit exceeded
consensus by 50%, an incredibly outstanding result. The inertia may push stocks
higher. Disney (DIS) will be reporting this week.
Technical outlook for
the S&P 500 index has improved after a standard correction of 5-7% and the
following recovery. The index has now returned to an upside formation, with
targets at 5250-5350 points. The nearest resistance is at 5140-5160 points, and
the support at 5020-5060 points. The index has to surpass the resistance in
order to update all-time highs. This could happen by the end of this week.
Oil prices are under
pressure, breaking out to the downside of the consolidation range of
$87.00-92.00 per barrel of Brent crude. Downward pressure is expected to
persist until mid-May, with support at $81.00-83.00 per barrel.
Gold prices, having
reached mid-term upside targets, are expected to consolidate as they hover
around $2000-2100 per troy ounce, with extreme targets at $2400-2500. The
nearest support is at $2290-2310, while resistance is at $2390-2410 per ounce. A
breakthrough of the support may result in further correction.
The Greenback continues
to lose ground after weak U.S. labour report for April and interventions by the
Bank of Japan. The EURUSD is likely to continue up, but first it could retreat
to 1.07200-1.07300. If the pair climbs above 1.08000-1.08300 it could
potentially move higher towards 1.09300-1.10300.