S&P 500 broad market index futures are
down by 0.65% to 5,651 points this Monday. A similar pattern was observed last
week, when the benchmark lost 1% during Monday trading but later recovered to
close the day in positive territory. The index added 2.9% over the week,
finishing at 5,701 points and fully recovering the 14% decline it suffered in
April. Only 2–3% remains before reaching extreme technical targets at
5,780–5,880 points. Beyond this range lies considerable technical uncertainty.
Nevertheless, fundamental factors suggest the possibility of a further rally,
particularly with support from a dovish Federal Reserve.
Microsoft (MSFT), Meta Platforms (META), Apple
(AAPL), and Amazon (AMZN) all delivered strong Q1 2025 earnings last week.
However, the broader U.S. economic picture is less encouraging. GDP contracted by 0.3% QoQ,
while the PCE Price Index edged lower to 2.3% YoY in March—above the consensus
of 2.2%. This combination of slowing growth and persistent
inflation raises concerns about stagflation. That said, with the PCE figure
nearing the Fed’s 2.0% target, and Nonfarm Payrolls at 177,000 in April (versus
expectations of 138,000) alongside steady unemployment at 4.2%, the U.S.
economy may remain on a sustainable footing. If the Fed offers some policy
support, recession fears might not materialise in the second quarter.
Manufacturing PMI data will be released on
Monday, with expectations of a slowdown that could heighten recession concerns
and pressure the S&P 500 further. Investors are also focused on the Fed’s
interest rate decision due on Wednesday. While consensus suggests the policy
rate will remain unchanged, Chair Jerome Powell’s post-decision comments will
be crucial. Recent macroeconomic data has reduced the probability of a
quarter-point rate cut in June to 34.3%. Meanwhile, U.S. President Donald Trump
renewed his call for immediate rate cuts last week.
Nonetheless, the market remains tense. A June
rate cut is still on the table, and Powell may choose to adopt a dovish tone to
pave the way for such a move, given signs of economic deterioration.
Conversely, a neutral stance may be interpreted as hawkish, helping to keep inflation
expectations in check.
Large investors appear to be in wait-and-see
mode, taking profits last week. The SPDR S&P 500 ETF Trust (SPY) recorded
$6.8 billion in net outflows, following $1.7 billion in the previous week.
Profit-taking may continue. Institutional investors previously placed a
significant $16.1 billion bet on April lows near 5,000, leaving about $4
billion still active. They may be waiting for the extreme technical targets at
5,780–5,880 points to be reached.
From a technical perspective, the S&P 500
outlook remains unchanged. Near-term upside targets of 5,310–5,410 have already
been exceeded, opening the path to extreme upside levels at 5,780–5,880. The
nearest resistance is at 5,680–5,700 points, while support is found at 5,580–5,600.
Brent crude oil briefly touched the resistance
zone of $67–69 per barrel before retreating. While short-term corrections are
anticipated, the medium-term outlook still points towards a rebound to $74–75
per barrel. Key support is at $57–59 following OPEC+’s decision to increase
production by 411,000 barrels per day starting in June, a move compounded by
signs of a slowdown in the U.S. economy.
Gold has entered a major correction after
reaching a record high of $3,499 per troy ounce on safe-haven demand. Prices
fell to $3,200 and are now recovering. Resistance is at $3,250–3,280. If gold
fails to break above this level, a renewed decline towards $3,000 remains
likely.
The U.S. Dollar is stabilising after a period
of strength. EURUSD is trading at 1.13330. Easing global trade tensions,
particularly between the U.S. and China, is having a positive effect, with
China inviting the U.S. to resume trade talks. EURUSD may be poised for a sharp correction, with medium-term downside
targets at 1.0600–1.0700 and short-term levels at 1.10500–1.11500.