S&P 500 Momentum Report

Wall Street drifts higher amid quieter US economic front

Last week, an initial dip in Wall Street was overridden by a late-week surge, as US labour conditions finally revealed more concrete signs of moderation, which helped to calm nerves around stagflation and offered room for the Federal Reserve (Fed) to consider earlier rate cuts. Markets are now pricing for a 25 basis point (bp) rate cut in September 2024, a pull-forward from the initial timeline of December 2024.

This week offered a relatively quiet economic calendar for the US, but it will likely be the calm before the storm as we look towards US consumer price index (CPI) data next week. Both the core and headline inflation data has surprised on the upside for the past four months and another higher-than-expected read could easily bring the high-for-longer rate narrative back. At least until some reservations kick in nearing the data release, there is still some runway for Wall Street to follow through with last week’s optimism, with major US indices drifting higher to start the week albeit with relatively lower volume.

S&P 500 technical analysis: Back at upper edge of daily Ichimoku Cloud

The S&P 500 has rebounded more than 5% from its mid-April 2024 low and is looking to retest the 5,200 level, where the upper edge of its Ichimoku Cloud resistance stands. For now, near-term moves seem to fall within an ascending channel pattern, with any failure to cross the 5,200 level potentially prompting a retracement towards the 5,060 level, where the lower channel trendline support resides. Its daily relative strength index (RSI) has edged back above its key 50 level to end last week, pointing to buyers in greater control for now. Unless the rising channel pattern has given way, the broader upward bias may remain.

Source: IG charts

Nasdaq 100 technical analysis: Standing less than 3% away from its all-time high

Similarly, the Nasdaq 100 index has also recovered more than 6% from its April 2024 low, leaving it less than 3% away from its all-time high at the 18,465 level. Its daily RSI has managed to edge above the mid-line lately, while its daily moving average convergence/divergence (MACD) eyes for a potential crossover into positive territory.

A rising channel pattern has put a series of higher highs and higher lows in place for now, with any retracement to leave key support at the 17,436 level on watch, where the lower channel trendline support stands. On the upside, the daily Ichimoku Cloud resistance at the 18,140 level will serve as immediate hurdle for buyers to overcome.

Source: IG charts

Sector performance

As rate expectations leaned more dovish in pricing for earlier rate cuts, US Treasury yields witnessed a dip lower last week, which renewed traction in rate-sensitive sectors. Communication services (+2.9%), technology (2.6%) and utilities (+2.45) managed to outperform the broader index, with the S&P 500 up 1.3% for the week. The ‘Magnificent Seven’ stocks were the heavy-lifters, with Nvidia, Amazon and Apple up more than 4.0% for the week, while Meta recovered 7.6% from its post-earnings drop. Tesla remains the outlier, closing 4.8% in the red, but this follows after a 40% gain over the past two weeks. The energy sector (-3.2%) was the worst-performing sector, taking its cue from a 6% dip in oil prices as geopolitical tensions in the Middle East abate, alongside a surge in US crude inventories.

Source: Refinitiv

Source: Refinitiv

Source: Refinitiv
*Note: The data is from 30th April – 6th May 2024.

Source: Refinitiv
*Note: The data is from 30th April – 6th May 2024.

Source: Refinitiv
*Note: The data is from 30th April – 6th May 2024.