S&P 500 broad market index futures are
mostly neutral around 5466 points. Last Friday, the index performed a true
acrobatic feat. It rewrote the all-time high at 5524 immediately after the
release of the May PCE index in the United States and later erased all weekly
gains down to 0.1%.
PCE readings perfectly matched consensus. The
headline PCE slowed down to 2.6% YoY from 2.7% in April, while Core PCE,
without food and energy, decreased to 2.6% YoY from 2.8% the previous month.
This is the lowest reading since March 2021.
Unexpectedly, soon after the release, U.S.
10-year debt yields jumped to 4.40%. Some analysts tried to explain this by the
strong Michigan consumer expectations data that was released just after the
PCE. Others highlighted the chaos in the Democratic Party after Joe Biden lost
the debate last Thursday, with many calling for him to step down as the
Democratic nominee. Political observers consider July 4 as a potential timing
for the President to bow out of the Presidential race, as there is little time
left for Democrats to present new candidates for the Presidential elections.
The benchmark 10-year debt yields continue to
rise up to 4.43% on Monday. This may indicate investor nervousness as they
await Biden’s final decision. This uncertainty is negative for stocks.
In France, the far-right National Rally party
led by Marine Le Pen won the first round of parliamentary elections with
33.15%, though this was less than expected. The left-wing New Popular Front
(NFP) coalition came second with 27.99%, and President Emmanuel Macron’s
Ensemble alliance received 20.76% and came third.
European stock indexes are rising on the news
on Monday, but yields on European debt are rising, reflecting the new reality
after the French elections. The next round is scheduled for July 7 and may
prompt a much more rigid market reaction.
There is a lot of news on the macroeconomic
front this week. The U.S. Manufacturing sector PMI may support the Dollar if it
increases as expected. U.S. Treasuries yields may increase further, which is not
good news for the stock market.
Inflation data from Europe, expected to be
released on Tuesday, is anticipated to show a slowdown. Following the release,
European Central Bank President Christine Lagarde and Federal Reserve Chair
Jerome Powell will be speaking. Powell may offer some dovish remarks to support
the market ahead of Independence Day in the U.S.
The Eurozone, the United Kingdom, and the
United States will release their June Services PMI on Wednesday. U.S. business
activity in the sector is expected to increase, while other PMIs are expected
to decline. The ADP will release its June Nonfarm Payrolls figures, providing
clues for the official release on Friday. Finally, the FOMC Minutes will be
published, with investors expecting more hawkish notes.
It would be hard to break for a public holiday
in the U.S. on Thursday, as investors will be waiting for Biden to deliver his
decision about his participation in the Presidential race. This tension will be
amplified by the June Nonfarm Payrolls release on Friday. Wall Street expects a
cooling of the labor market, which may help the S&P 500 hit the final
extreme target of 5650-5750 points.
From a technical perspective, the S&P 500
index outlook remains largely unchanged. It has surpassed its primary targets
of 5250-5350 points and is now aiming for extreme targets of 5650-5750 points,
potentially achievable this week. Immediate resistance is at 5570-5590 points,
with support at 5470-5490 points.
Oil prices are holding above the support level
of $80.00-82.00 per barrel for Brent crude, steadily climbing toward resistance
at $88.00-90.00 per barrel. This climb is supported by OPEC+, which indicated
that any increase in oil production in October would be symbolic compared to
current levels. Political tensions in the Middle East also support prices.
However, a technically favorable period for oil prices will end this week,
potentially limiting upside potential.
Gold prices, having reached mid-term targets
of $2000-2100 per troy ounce, are now eyeing extreme targets of $2400-2500.
There is limited room for further increases, and a pullback could occur soon.
For a downside scenario targeting $2200 per ounce to materialize, support at
$2300-2320 must be breached. Immediate resistance is at $2390-2410.
The Dollar is losing its position, with EURUSD
climbing to 1.07750 after a rather positive French election result. If the pair
drops below the support at 1.06600-1.06800, it may continue down to 1.05000.