S&P 500 broad market index futures are
rising by 1.2% to 5,870 points. However, this rally may not be sustainable, as
the benchmark recently dropped to 5,742 on Friday, entering a downward
technical formation with primary downside targets at 5,550–5,650 points, or
roughly 4.5% lower. Friday’s drop of 1.9% in the S&P 500 was driven by U.S.
President Donald Trump’s announcement of 50% tariffs on the European Union due
to stalled trade talks. European Commission President Ursula von der Leyen
contacted Trump and secured a postponement of the tariff hike to July 9 to
allow for negotiations. The delay helped spark the current rebound, with the
S&P 500 recovering above Friday’s opening levels, suggesting the immediate
threat to the market has been lifted.
Large investors were active buyers last week.
The SPDR S&P 500 ETF Trust (SPY) reported net inflows of $4.29 billion,
excluding Friday’s session. If Friday's flows are not significantly negative,
this would mark the first weekly inflow in five weeks — a potentially strong
signal that institutional investors are returning. Despite the short-term
breakdown in the technical pattern, a medium-term buy signal was generated last
week for the first time since September 2024, indicating a possible shift in
investor behavior. The last such signal preceded a 9.8% rally in the index.
With the tariff-driven selling pressure now removed, the benchmark appears to
be preparing for a continuation of its April–May rally. A tactical buy signal
would emerge if resistance at 5,930–5,950 is breached.
Monday is a market holiday in the U.S., but
attention will return midweek with the release of the FOMC Minutes on Wednesday
and Nvidia’s (NVDA) Q1 earnings report after the market close. While investors
have low expectations for additional hawkish signals from Fed Chair Jerome
Powell, any softening or even neutral tone in the minutes would be viewed as
supportive. Nvidia’s results could provide a key boost to the market,
particularly amid recent uncertainty in the AI sector following China’s DeepSeek
release. If Nvidia performs strongly, it would help reaffirm confidence in the
sector, which remains a core driver of the rally. Other major tech companies
have reported strong results, fueling optimism.
On Thursday, markets will digest the second estimate
of U.S. Q1 GDP. The initial figure showed a sharp slowdown to 0.3% QoQ. Any
upward revision would be welcomed, especially as the Atlanta Fed’s GDPNow model
suggests such a possibility. Even if the low growth figure holds, it could increase
expectations of a Fed rate cut. The week concludes with April’s Personal
Consumption Expenditures (PCE) price index, the Fed’s preferred inflation
measure. Core PCE is expected to decline to 2.5% YoY. Recent inflation data
suggest disinflationary trends — a positive sign for equities.
Technically, the S&P 500’s outlook has
turned bearish in the short term. Futures have shifted from an uptrend to a
downtrend, with downside targets between 5,550–5,650. If the index manages to
break and stabilize above 5,930–5,950, the trend could revert to bullish.
Immediate support is located at 5,730–5,750.
Brent crude oil prices are hovering around
$64.50 after pulling back from resistance at $67.00–69.00 per barrel. Trump
stated that the fifth round of U.S.–Iran talks is showing signs of progress.
Immediate support remains at $57.00–59.00. Over the longer term, the potential
for a move toward $75.00–77.00 remains intact.
Gold entered a corrective phase after the
tariff threat against the EU was deferred. Prices failed to hold above
$3,330–3,350 and currently sit at $3,327 per ounce. A pullback toward $3,290 —
the level at Friday’s open — appears likely, with the possibility of a deeper
correction toward $3,230–3,250.
In currency markets, the EURUSD rose to
1.14150, briefly breaking above the primary upside target of 1.13500. However,
confirmation of a sustained breakout is still lacking. With the tariff threat
postponed, the pair is likely to return to its initial target range of
1.13500–1.13700. A move below this range could open the door to a retreat
toward 1.12500, potentially setting up a more prolonged downward reversal.