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  • Weekly Summary: Nonfarm Payrolls Unlikely to Change Market Sentiment Dramatically

Weekly Summary: Nonfarm Payrolls Unlikely to Change Market Sentiment Dramatically

S&P 500 broad market index futures have experienced a 0.4% decline, currently resting at 5085 points. At their lowest, prices dipped to 5009 points, marking a 1.7% loss. Despite this, strong corporate reports from the "Magnificent Seven" helped the index recover most of its losses.

The recent Federal Reserve (Fed) meeting caught investors by surprise with its dovish decisions. The central bank announced a reduction in its government bond-buying program, from $60 billion to $25 billion per month starting June 1st. Fed Chair Jerome Powell emphasized that policymakers are not considering any interest rate hikes, despite the recent uptick in inflation during February and March. Some investors, however, believe that rate hikes may be necessary.

While Powell acknowledged the persistent inflationary pressures, he also expressed concerns about elevated inflationary risks. This seeming contradiction may reflect fears of a significant economic downturn and market correction, which are topics of intense debate in the market. Consequently, investors are hesitant to open new long positions. The SPDR S&P 500 ETF Trust (SPY) reported net capital outflows of $3.1 billion this week, marking the fourth week of net outflows in the last five weeks.

Despite the dovish signals from the Fed and strong Q1 earnings results from companies like Amazon (AMZN) and Apple (AAPL), stock indexes are showing reluctance to rally. Apple also announced an additional buyback of $110 billion. It appears that market participants are cautious about potential market corrections and are avoiding additional risks ahead of the summer holidays.

The upcoming U.S. labor market report on Friday is expected to deliver mostly neutral numbers. Our statistical modeling forecasts April Nonfarm Payrolls at 236,000-238,000, in line with Wall Street analysts' expectations. Unemployment is likely to remain at 3.8%, with average hourly earnings expected to increase by 0.3% MoM. While this report could bring some volatility, it is unlikely to shift existing market sentiment significantly.

Technically, the S&P 500 index remains within a downside formation, with targets at 4800-4900 points and extreme downside targets at 4400-4500 points. Resistance has shifted lower to 5040-5060 points, with the benchmark currently above this level, signaling strength. The next resistance is located at 5090-5120 points, with support at 4890-4920 points. Continued correction could solidify the downside scenario as the baseline trend.

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. Continued support may result in further correction.

The Greenback has experienced a 0.4% decline after intervention by the Bank of Japan, with the USDJPY retreating to 153.00. The EURUSD remains around 1.07400, continuing its trajectory towards 1.05000, pending a correction in the S&P 500 index.