S&P 500, FTSE 100 Analysis and News
S&P 500 | Equity Sentiment Remains Fragile
A short squeeze to end the week sees the S&P 500 avoid meeting the technical definition of a bear market, which is a peak-to-trough 20% decline. That being said, with inflation likely to remain elevated for longer as emphasised by this week’s CPI print, downside risks will remain for the S&P 500.
Not a Bear Market “Technically” Speaking
Among the key questions going forward is likelihood of a 75bps Fed rate hike, and while the Fed have slightly backed away from this, Chair Powell did state that they would do more if the data suggested a need for such action, which this week’s CPI print would support. At the same time, markets are getting more accustomed to the view that the Fed could be hiking into a downturn as growth engines in China and Europe begin to stall. In turn, until we see signs that China are turning back from its zero-covid policy and a potential truce between Russia and Ukraine, the outlook will continue to look gloomy. On the technical front, resistance sits at 4100, while support resides at 3850.
S&P 500 Chart: Daily Time Frame
Source: Refinitiv
FTSE 100 |Key UK Data Ahead
Another volatile week for the FTSE 100 where inflationary pressures and slowing economic activity remains the dominating theme. Although, despite this, a modest recovery as we close out the week sees the FTSE 100 pare the majority of its weekly drop. The question is, whether the squeeze higher extends past the short term given that much of the risks that have plagued the market have yet to ease up.
As we look ahead, next week will see a raft of tier 1 UK data points for market participants to digest. Firstly, the inflation print for April, where the headline rate is expected to hit 9% as it takes into account the Ofgem cap increase, further highlighting the cost of living squeeze that UK consumers will face. However, perhaps what will be more important is the jobs data given that BoE hawks have referenced the strength in pay growth as a rationale for aggressive rate hikes.
Therefore, any signs of slowing in the labour market would see another dovish repricing in the rates market, which remains aggressive as markets continue to price the bank rate at 2% by year end. Resistance situated at 7450-60 (circa 20DMA), support at 7200 (weekly lows).
Source: DailyFX
FTSE 100 Chart: Daily Time
Source: Refinitiv
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