S&P 500 broad market index futures rose by
0.4% to 4985 points this week. It is rather a rebound from the dips of last
week, which was the worst since March 2023. That week has seemingly set an
overall negative trend for the spring.
Chicago Federal Reserve (Fed) President Austan
Gooldsbee said that the Fed policy is on hold because of stalled progress on
inflation. So, the Fed has to wait for its trajectory to become clearer before
cutting its rates. So, we may assume that the rates would not be cut this year
unless the macroeconomic data or market correction would become much of a
trouble. This could be a baseline scenario for the Fed now.
This scenario is further confirmed by the CME
FedWatch Tool data, where the September Fed meeting has the highest chances for
interest rates cuts by 0.25 points with 45.5%. Interest rates cuts would be
very useful for Joe Biden’s reelection in November. The debt market sends
similar signals with U.S. 10-year Treasuries yields gradually climbing. They
have reached 4.66% on Monday. 2-year Treasuries yields, which are considered to
have a close trajectory to Fed rates dynamics, are above 5.00%. The highest
level was reached at 5.25% in September 2023.
Incoming macroeconomic data this week may
weaken this trend. The first Q1 2024 U.S. GDP estimate will be released on
April 25. GDP is expected to slow down to 2.5% QoQ from 3.4%. If this estimate
would be confirmed, it may near interest rates cuts and support stocks. March
headline PCE index is expected to increase to 2.6% YoY from 2.5% in the
previous month, while Core PCE is expected to slow down to 2.6% YoY from 2.8%
YoY. Such a configuration could be considered positive or neutral for
investors. Together with declining GDP, it may help the S&P 500 index to
rebound towards 5100 points, or by 2.4%.
However, further positive corporate news is
needed for a solid rebound. Tesla (TSLA), Meta (META), Microsoft (MSFT), and
Alphabet (GOOG) from the “Magnificent Seven” will be reporting this week. The
crowd is expecting a 38% increase in profits. If they fail to meet these
expectations, the index may drop to 4910-4920 points. This is the last stand
between the index and the extreme target at 4400-4500 points.
Technically, the S&P 500 index has made a
standard 5-7% correction, as it fell by 6.8%. Now it is all about extreme
targets or recovery. This week, a recovery towards 5000-5020 is more likely.
The support is at 4910-4920 points. If the correction continues, extreme
downside targets at 4400-4500 points will become available.
Oil prices continue to retreat after the
resistance at $92.00 survived despite the geopolitical crisis in the Middle
East. A path to $100 per barrel is currently blocked, and downward pressure is
expected to continue by mid-May. The support is 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 are
intact. A technical period favorable for upside scenarios will last by
mid-June. But prices are too high already, and consolidation could be expected.
The nearest support is at $2290-2310.
The EURUSD recovered to 1.06700-1.06800 again
and bounced back. The EURUSD is heading to 1.05000. The nearest downside target
is at 1.05500-1.05800. There is a risk of Bank of Japan interventions to
support the Yen that may cancel this scenario.