S&P 500 Momentum Report

Wall Street returns from holiday break

US equity futures point to a revival in risk sentiments at the time of writing, as Wall Street returns from its Memorial Day break on Monday. Thus far, market participants continue to bask in the optimism that Federal Reserve (Fed) policymakers have put additional rate hikes off the table, while corporate earnings continue to hold up to justify current valuation. With the mid-April market retracement, both market breadth and investor sentiments for major US indices are now back at more neutral levels, which should push back against previous concerns of overbought conditions and offer room for the risk rally to continue.

Look-ahead: US core Personal Consumption Expenditures (PCE) price index

With optimism that the Fed will have room to consider rate cuts as early as September this year, the Fed’s preferred gauge of inflation will be on watch this week to offer assurances that US inflation remains under control. With the earlier April consumer price index (CPI) reading showing further progress in inflation, it may have to take much more to trigger concerns of any reacceleration in pricing pressures.

Expectations are for headline and core PCE to remain unchanged at 2.7% and 2.8% year-on-year. Barring any significant upside surprise, market participants may be assured that keeping rates at current level for longer will do the job, which could keep the risk environment supportive of further gains.

S&P 500 technical analysis: Hovering at all-time high territory

The S&P 500 was kept in a period of short-term consolidation, as market participants await further catalysts for more follow-through in the risk rally. A recent retest of a horizontal resistance-turned-support at the 5,260 level was met with a bullish rejection, which suggests buyers in broader control. For now, the upward trend in the index remains, with its daily relative strength index (RSI) trading above its key 50 level. Immediate support remains at the 5,260 level, which on the upside, a fresh break above its current ranging pattern may pave the way for the index to retest the 5,400 level next.

Source: IG charts

Nasdaq 100 technical analysis: New higher high reinforces upward trend

Similarly, the Nasdaq 100 index has traded firmly on a new higher high, which kept the broader upward trend intact. This comes despite higher US Treasury yields over the past week, with the shrugging-off highlighting the resilience of buyers. Immediate support could be presented at the 18,500 level, while a push higher could leave the 19,300 level on watch next as a potential Fibonacci extension level. Trading above various moving averages (MAs) and its daily Ichimoku Cloud point to prevailing upward trend and suggest buying-on-dips as the lower-risk strategy.

Source: IG charts

Sector performance

Wall Street saw broad profit-taking across the board last week, with ten out of 11 S&P 500 sectors in the red after major US indices touched fresh record high territory the week before. The technology sector is the only sector with gains, heavy-lifted by Nvidia’s stellar 1Q results as demand for its artificial intelligence (AI) chips has shown little signs of easing. Its promising growth trajectory offered justification for its valuation, which paved the way for its share price to scale above the US$1,000 mark ahead of its share-split date. Nvidia was up 15.1% for the week, with semiconductor peers Qualcomm (+8.5%) and Analog Devices (+8.6%) contributing to strength in the tech sector as well. On the other hand, the energy sector was dragged 3.2% lower in response to weaker oil prices, with Exxon Mobil down 5%, adding to the streak of underperformance in the energy sector over the past month.

Source: Refinitv

Source: Refinitiv

Source: Refinitiv
*Note: The data is from 21st – 27th May 2024.

Source: Refinitiv
*Note: The data is from 21st – 27th May 2024.

Source: Refinitiv
*Note: The data is from 21st – 27th May 2024.