S&P 500 Forecast: SPX muted in a calm start to a busy week

US futures

Dow futures +0.03% at 36222

S&P futures +0.05% at 4603

Nasdaq futures -0.08% at 16068

In Europe

FTSE -0.5% at 7510

Dax -0.04% at 16753

• Investors sit on the sides ahead of CPI & FOMC this week
• Fed rate cut bets have been reined in after Friday’s NFP
• Macy’s soars on buyout offer
• Oil holds steady after seven weeks of losses 

Investors sit on the sidelines

US stocks are set to open in a muted fashion at the start of a busy week for risk events, with the release of US inflation data tomorrow and the Federal Reserve interest rate decision on Wednesday.

US equities indices booked gains on Friday after showing that the US jobs market remained resilient despite the Federal Reserve's aggressive rate hiking cycle, boosting optimism of a soft landing for the US economy.

Attention is now turning to US inflation data tomorrow, which could be the key driver this week and set the tone for expectations from the FOMC meeting on Wednesday. Inflation cooled by more than expected in October, which fueled the November rally. Another cooler-than-forecast cast reading could add to dovish pivot bets. However, signs of persistent inflation could see the market rein in rate-cut bets.

Goldman Sachs predicted that the Fed will cut interest rates twice by the end of next year, bringing forward the expectations of the first rate cut to Q3 owing to the cooler than expected inflation data in October.

Meanwhile, the CME Fed watch tool sees the market pricing in a 40% probability of a rate cut in March, down from around 60% just a few weeks earlier. The market is pricing in a 50/50 chance of a cut in May, and the first 25 basis point rate cut isn’t fully priced in until Q3.

This week will be about whether the data and the Fed align with the market view.

Corporate news

Macy's is set to open over 20% higher after receiving a buyout offer. Arkhouse Management and Brigade Capital Management offered $5.8 billion to buy the department store, which marks a 21% premium based on Macy's closing stock price of $17.39 on Friday.

S&P 500forecast – technical analysis

The S&P 500 is holding steady at 4600, just below last week’s high of 4609. A rise above this level is needed to create a higher high and bring 4635 the November 2022 high into play. On the downside, support is at 4544, the September high, with a fall below this level negating the near-term uptrend and opening the door to 4400.

FX markets – USD flat, EUR/USD steady

The USD is holding steady ahead of a key week for the currency. There is no major economic data due to be released today. Attention is firmly on tomorrow's inflation figures ahead of the Fed rate decision on Wednesday.

EUR/USD is holding steady in the quiet before the storm as investors wait cautiously for rate decisions from both the ECB and the Federal Reserve this week. Both central banks are expected to leave rates on hold, but the ECB may adopt a more dovish tone as inflation is close to the 2% target. The economic calendar is quiet today. German ZEW economic sentiment figures are in focus tomorrow.

GBP/USD is inching higher but trades within a familiar range amid the quiet UK economic calendar. Things will pick up tomorrow with the release of UK jobs data ahead of Thursday's Bank of England interest rate decision, where a hawkish-sounding BoE could lift sterling further.

EUR/USD -0.01% at 1.0755

GBP/USD +0.15% at 1.2570

Oil steadies after 7-weekly declines

Oil prices are steady after falling over 3.5% last week, marking the seventh straight weekly decline.

Concerns surrounding the demand outlook and oversupply have lowered oil prices despite the OPEC+ voluntary cuts.

However, oil found some support on Monday after the US government agreed to buy up to 3 million barrels of crude oil for strategic petroleum reserves.

Meanwhile, on the demand side, concerns over fragile economic recovery in China, the world's largest oil importer, are capping the upside. Data showed deflationary pressures are rising as weak domestic demand casts doubts over the health of the economy and supports the view that China needs more stimulus support.

WTI crude trades -0.08% at $71.35

Brent trades -0.08% at $76.14