S&P 500 Momentum Report

US CPI as the key market risk event this week

Wall Street has been taking comfort with a dovish outcome from the recent Federal Reserve (Fed) meeting and along with some signs of weakness in US labour conditions, that seem to pave the way for markets to price for imminent monetary policy easing as soon as September this year.

With that, the upcoming US consumer price index (CPI) will determine if markets have actually gotten ahead of themselves. Having seen upside surprises in US consumer prices over the past five months, markets will want to see more inflation progress to be reassured that stagflation risks are off the table. Any persistence in pricing pressures could easily dent the risk party, given that recent bounce in Wall Street has come on relatively lower volume.

Ahead, expectations are for US headline CPI to come in at 3.4% year-on-year, down from the previous 3.5%, while core consumer prices are expected to come in at 3.6% year-on-year, which is down from the previous 3.8%.

S&P 500 technical analysis: On hold for US CPI data release

The S&P 500 has rebounded more than 6% from its mid-April 2024 low, with the index standing just inches away from its all-time high. The reservation is that the bounce came on relatively weaker volume, which suggests much reservations in place for any go-ahead from the upcoming US inflation data. Any upside may leave immediate resistance at the all-time high level of 5,278, while on the downside, support confluence may be found at the 5,100 level, where a lower channel trendline coincides with the lower edge of its daily Ichimoku Cloud support.

Source: IG charts

Nasdaq 100 technical analysis: Less than 2% away from its record high

The Nasdaq 100 index is now standing less than 2% away from its record high at the 18,468 level, with recent price movement trading in a short-term range, as sentiments are on hold for the upcoming US inflation data. This comes as the index nears the upper range of its daily Ichimoku Cloud resistance. For now, bulls seem to be in broad control with its daily relative strength index (RSI) trading back above the mid-point and its daily moving average convergence/divergence (MACD) back into positive territory but of course, much weight will still be on the upcoming US inflation data to determine any follow-through. Resistance ahead may be at the 18,468 all-time high level, while on the downside, any retracement could leave the 17,800 level on watch for any retest, where the lower end of the Ichimoku Cloud support stands.

Source: IG charts

Sector performance

Wall Street continued to recover over the past week with its third straight week of gains, as the S&P 500 edged 0.8% higher. All sectors were in the green, with the exception of consumer discretionary (-1.1%), which was dragged by a 7% dip in Tesla. Overall, market participants were still seen taking on a more defensive lean with utilities, real estate and consumer staples being the top performing sectors. The utilities and consumer staples sectors have outperformed on a one-month basis as well. Growth sectors were largely flat, as a mixed run of US economic data still places some uncertainty on the timeline of Fed’s rate cut, with US Treasury yields stabilising around their respective one-month low. The energy sector (+0.3%) was somewhat lacklustre, with oil prices struggling to see significant pick-up as geopolitical risks took a backseat.

Source: Refinitiv

Source: Refinitiv

Source: Refinitiv
*Note: The data is from 7th – 13th May 2024.

Source: Refinitiv
*Note: The data is from 7th – 13th May 2024.

Source: Refinitiv
*Note: The data is from 7th – 13th May 2024.