Weekly Focus: U.S. GDP and PCE

The S&P 500 index futures are trading neutrally around 5302 points, which is an improvement from the 0.6% drop seen on Friday morning. By the end of the day, the index had recovered to a modest 0.1% decline. The market lacked significant driving factors to push the index upward, aside from the positive momentum from NVidia's (NVDA) outstanding Q1 2024 earnings report. NVidia's stock surged by 12.6% to $1065 per share over two days, boosting the tech-heavy Nasdaq 100 index by 1.4% to 18,800 points. Other sectors, such as those represented by the industrial Dow Jones 30 index, lagged behind the tech sector.

However, NVidia alone cannot sustain the entire stock market's upward movement for long. Potential upside factors may emerge later in the week with the release of the U.S. Q1 2024 GDP second estimate and the PCE index. Wall Street analysts expect GDP growth to decrease to 1.3% YoY from the initial estimate of 1.6% YoY. Confirmation of these expectations would likely strengthen the case for an interest rate cut by the Federal Reserve (Fed) in September, with current bets on this scenario at 44.9%, according to the CME FedWatch Tool.

The U.S. April PCE index is forecasted to remain at 2.7% YoY, and the Core PCE at 2.8%. If these forecasts hold, they could moderately support positive sentiment in the stock market. A larger-than-expected decrease in the PCE could provide a slight boost to the S&P 500 index. Nevertheless, there are no significant upside or downside drivers for the stock market at the moment, suggesting a sideways market during the summer.

The SPDR S&P 500 ETF Trust (SPY) reported net inflows of $7.3 billion last week, marking the second consecutive week of positive inflows after a period of net outflows. While this is insufficient to propel the benchmark to new highs, it may facilitate a test of resistance at 5250-5350 points.

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

Oil prices are recovering to $82.80 per barrel of Brent crude, with further growth constrained by the lack of strong upside drivers. The start of the driving season in the United States, May PMI readings in China, and the upcoming OPEC+ meeting this weekend may potentially support oil prices. 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, with immediate resistance at $2390-2410.

The U.S. Dollar struggled to gain strength, as the EURUSD support at 1.08000-1.08200 held firm. Prices may still advance to 1.09000 and beyond, even though the primary upside targets at 1.08950 have been met. If the pair slips below 1.08000, a drop to 1.05000 should not be excluded in the mid-term.