Weekly Summary: Investors are Scared by Hawkish Powell

The S&P 500 broad market index futures rose by 0.4% to 5157 points this week, reaching a new high. However, the index saw a slight rollback on the back of rising inflation concerns.

Headline inflation rose to 3.2% YoY, up from 3.1%, with monthly inflation increasing to 0.4% from 0.3%. Core CPI, excluding volatile food and energy prices, slowed to 3.8% but missed the expected 3.7%. The monthly reading remained flat at 0.4%, versus the consensus of 0.3%. Despite these figures, the market largely shrugged off the data, with the S&P 500 rising by 1.0% on Tuesday. Nevertheless, bets on interest rate cuts by the Federal Reserve (Fed) in May dropped to 9.6% from 24.2%, according to the CME FedWatch Tool. The U.S. 10-year Treasuries yields began climbing, a trend further fueled by higher-than-expected February producer prices, which rose by 1.6% YoY.

These developments pushed 10-year Treasury yields close to December 2023 highs, reaching 4.28%. The S&P 500 index dipped by 1.0% to 5129 points on Thursday, but later recovered to -0.4%.

While inflation data raised concerns for a more hawkish stance from the Fed and Chair Jerome Powell, it's unlikely to turn stocks negative this week. However, such expectations could temper any upward momentum for stocks.

The S&P 500 has exceeded the final upside target zone at 4850-4950 points and missed potential correction opportunities. Betting on a rally before a correction could be risky, with reversal patterns indicating a standard correction of 5-7% within the next four weeks. The starting point of this correction is yet to be defined, but potential downside opportunities may emerge by the end of March. The nearest resistance is at 5190 points, while support is at 5090-5110 points.

Oil prices surged to $86.00 possibly reacting to higher crude inventories in the United States and global oi deficit in 2024 projected by International Energy Agency. Escalation between Israel and Hezbollah in Lebanon may also play some role in rising prices. The nearest resistance is at $87.00-92.00 per barrel, while the support is at $81.00-83.00 per barrel.

Gold prices, having reached mid-term upside targets at $2000-2100 per troy ounce, established a new all-time high at $2195. Prices are retreating a little from this level. The nearest resistance is at $2200 per ounce, while support is at $2100-2120. A technical period favorable for downside scenarios will start next week.

The currency market is mostly flat this week, with the U.S. dollar slightly up by 0.5% amid strong macroeconomic data. It remains risky to bet on both the rising and declining EURUSD, with a return to the 1.11500-1.12500 area likely, but a drop to 1.05000 should not be excluded. Elevated volatility is expected ahead of the Fed meeting on March 19-20.