S&P 500 Forecast: SPX rises ahead of key tech earnings this week

US futures

Dow futures 0.61% at 38201

S&P futures 0.63% at 4997

Nasdaq futures 0.69% at 17156

In Europe

FTSE 1.8% at 8040

Dax 0.8% at 17885

• Stocks rise after steep sell-off last week
• Fed rate cut expectations have been pushed back
• Tesla, Meta, Microsoft, and Alphabet report this week
• Oil falls as Middle Eastern tensions ease and demand worries grow

Stocks inch higher after losses last week

US stock point to a positive start after two straight weeks of steep losses, particularly in technology stocks, on waning expectations of Fed rate cuts.

The S&P 500 fell 3.5% last week, while the Nasdaq 100 dropped 6.1% amid weakness in the tech sector. Sticky inflation and hawkish Fed comments saw Fed rate cuts pushed back to later in the year.

Earnings are the focus of attention this week. Four magnificent seven stocks, including Tesla Meta, Microsoft, and Alphabet, are due to report this week. However, the tech sector is nursing steep losses over the past week, particularly after earnings from bellwether chipmakers ASML and TSMC boosted concerns that artificial intelligence could only provide a limited lift to the sector. Nvidia plunged 10% on Friday, taking it to a two-month low.

Looking ahead, as well as earnings, there is plenty of macro data for investors to be sinking their teeth into, including PMI data for April and Q1 GDP on Thursday and the fed's preferred gauge for inflation, core PCE, due on Friday. These data points could provide more clues about the timing of possible fed interest rates can't.

On Friday, Fed official Goolsbee highlighted the lack of progression in cooling inflation, which meant there was no urgency to cut rates. Meanwhile, St Louis Fed President James Bullard warned that the Fed rate cut might not come until later in the year.

Corporate news

Tesla is set to fall sharply on the open after announcing fresh price cuts in several key markets, including Germany and China, just days after price cuts in the US. The move comes as the company struggles with declining EV sales and increasing competition in the market. Tessa is due to report earnings after the close tomorrow. Expectations are low, given the weak Q1 deliveries.

Verizon, the telecommunications giant is set to rise over 1% on the open after earnings came in ahead of expectations. Verizon posted an EPS of $1.15 in Q1, ahead of the $1.12 forecast. However, revenue reached $33 billion, slightly below the $33.32 billion forecast.

A Bitcoin miner, Riot Platforms jumped almost 6% after JP Morgan Chase reiterated its overweight rating. The upgrade comes after the cryptocurrency's fourth-ever halving event on Friday. Other cryptos, such as Coinbase, Marathon Digital, and Micro Strategy, are all set to rise.

S&P 500 forecast – technical analysis.

The S&P 500 has been trending lower for the past three weeks, falling to a low of 4940 before attempting to recover towards 5000. The long lower wick on today’s candle suggests that there was little selling demand at the lower levels. This hammer candlestick pattern is often found at the bottom of a downtrend. Buyers will look to lift the price above 5000 and on to 5050, the March low. Above here, 5150 comes back into play. Meanwhile, sellers would look to take out 4925 to extend the selloff towards 4850, the February low.

FX markets – USD rises, GBP/USD falls

The USD is rising, tracking treasury yields higher, on expectations that the Federal Reserve could keep interest rates high for longer. Recent hawkish comments from Fed officials and strong data mean there is no agency for any rate cut scene.

EUR/USD is struggling below 1.0650 on USD strength and ECB president Christine Lagarde's speech. The ECB is expected to start cutting rates in June, earlier than any potential moves by the Fed, just keeping pressure on the pair. Eurozone consumer confidence is also due later and is expected to show that morale improved slightly to -14 in April, up from -14.9.

GBP/USD is falling towards 1.23 fresh 2024 lows on the expectation that the Bank of England will start to cut interest rates this summer. After dovish comments by BoE vice president David Ramsden on Friday, the market is now fully pricing in a 25 basis point rate cut in August, with two rate cuts expected this year. This contrasts the Fed, which isn’t likely to cut rates until September, potentially later.

Oil slips on demand worries

Oil prices Engine lever after falling over 2% last week as the market has our attention back to inflation tensions in the Middle East ease.

Iran's playing down reported Israeli attacks and comments that it did not plan to retaliate has eased concerns of an escalation of tensions in the region. The markets continued to unwind the geopolitical risk premium that was imposed on oil prices due to potential supply disruptions should tensions with Iran escalate. As we've seen previously, risk premiums don't often last long if supply is not likely to be impacted.

Instead, the focus is very much on the US demand outlook and the prospect of high interest rates for longer, which could curb economic growth and negatively impact the demand outlook. Meanwhile, the stronger U.S. dollar, which has risen to six senses major pairs, makes buying oil more expensive.

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