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  • Weekly Summary: Stocks Fell for the First Time in Six Weeks

Weekly Summary: Stocks Fell for the First Time in Six Weeks

S&P 500 broad market index futures are down by 0.6% to 5271 points this week, following a sharp decline on Thursday after reaching a new all-time high of 5349 points. The drop was influenced by the FOMC Minutes, which revealed a more hawkish stance from the Federal Reserve (Fed) than previously suggested. While the Fed maintained interest rates and further reduced its quantitative tightening program, Fed Chair Jerome Powell stated no further rate hikes were planned. However, the Minutes indicated disappointment with the Q1 2024 inflation slowdown and emphasized the need to maintain high interest rates until clear evidence of declining inflation appears. Some hawkish Fed members are even open to another rate hike if inflation remains stubborn in May and June.

Investors were eagerly awaiting NVidia's (NVDA) Q1 2024 earnings report, which surpassed Wall Street's boldest expectations. Adjusted earnings per share (EPS) reached $6.12 for the quarter ending in April, with sales at $26.04 billion, compared to $1.09 per share on sales of $7.19 billion in the same period of 2023. This remarkable increase of EPS by 461% YoY and revenues by 262% YoY caused NVidia stocks to surge by 9.3% to $1037 per share, briefly boosting the S&P 500 index to a new all-time high.

However, this optimism was dampened by surprising PMI readings released on Thursday. Manufacturing PMI unexpectedly rose to 50.9 points from 50.0, while services PMI increased to 54.8 points, the highest since May 2023. Wall Street had expected services PMI to drop to 51.2 points from 51.3 points in April. This combination of data fueled fears of inflation risks, reducing hopes for Fed interest rate cuts in September. Bets on this scenario dropped to 46.5% from 49.5%, according to the CME FedWatch Tool. U.S. 10-year Treasury yields rose to 4.47%, the highest in two weeks.

Next week, the U.S. Q1 2024 final GDP estimate and April PCE Index will be released, potentially further influencing market movements. The S&P 500 index appears to have exhausted its upside opportunities, with a technical period favorable for gains ending in the middle of next week, possibly leading the stock market to trend downward.

From a technical perspective, the S&P 500 index remains within an upward formation targeting 5250-5350 points, suggesting limited upside potential. Extreme targets lie at 5650-5750 points, though these levels seem unrealistic in the near term. Immediate resistance is at 5340-5360 points, with support at 5240-5260 points.

Oil prices have failed to recover, slipping to $81.15 per barrel of Brent crude. The nearest support is at $80.00-82.00 per barrel, with resistance at $89.00-91.00.

Gold prices, after reaching mid-term upside targets, are expected to consolidate around $2000-2100 per troy ounce, with extreme targets at $2400-2500. There is limited room for prices to increase further, so consolidation is likely. Having established a new all-time high at $2450 per ounce and retraced sharply by 3.5%, the nearest support is at $2290-2310. A breakthrough of this support could lead to a deeper correction. Immediate resistance is at $2390-2410.

The U.S. Dollar is struggling to continue its upward movement. The EURUSD is retesting support at 1.08000-1.08200, with primary upside targets at 1.08950 already met. If the pair slips below 1.08000, a drop to 1.05000 should not be excluded in the mid-term.