Weekly Summary: Inflation Down, S&P 500 Advances

The S&P 500 broad market index futures rose by 1.5% to 5300 points this week, hitting a new all-time high at 5326 points before pulling back slightly on hawkish comments from Federal Reserve (Fed) officials.

The index began its ascent on May 14, following the release of the April producer prices in the United States. The Producer Price Index (PPI) increased to 2.2% YoY, which is typically negative for stocks, but the March reading was revised down to 1.8% YoY from the previously reported 2.1%. This revision inspired investor optimism. The major surprise came on Wednesday with the release of the April Consumer Price Index (CPI), which showed a slowdown to 3.4% YoY from 3.5%, as expected. The monthly reading came out better than expected at 0.3%. This marked the first decline in inflation in 2024, bolstering investor confidence. Additionally, retail sales figures for April remained flat, down from 0.6% MoM in March, signaling a cooling consumer sector and prompting investors to buy stocks.

U.S. 10-year Treasury yields dropped to 4.31% from 4.50% over the week. Bets on a Fed interest rate cut in September rose above 50%. The SPDR S&P 500 ETF Trust (SPY) reported $4.1 billion in net inflows. However, some Fed officials, including Cleveland Fed President Loretta Mester, Richmond Fed President Tom Barkin, and New York Fed President John Williams, voiced support for maintaining high interest rates. They were not overly impressed by the inflation data, indicating it wasn't sufficient to justify imminent rate cuts. Fed Governor Christopher Waller and San Francisco Fed President Mary Daly are scheduled to speak on Friday; their comments could further influence the market. If they echo the hawkish sentiments, the S&P 500 index may continue to decline. Otherwise, it might return to its new highs.

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 appear unrealistic in the near term. Immediate resistance is at 5340-5360 points, with support at 5240-5260 points.

Oil prices are recovering from the support range of $81.00-83.00 per barrel for Brent crude, with the nearest resistance at $89.00-91.00 per barrel. No immediate fundamental factors suggest a significant upward movement in oil prices.

Gold prices, having reached mid-term upside targets, are expected to consolidate 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. A breach of support may trigger additional correction.

The Greenback continues to descend following weak U.S. macroeconomic data releases. The EURUSD surpassed 1.08950 and is currently retreating. Primary upside targets have been met, so a drop to 1.05000 should not be excluded in the mid-term.