S&P500 Forecast: SPX rises as inflation cools

US futures

Dow futures -0.38% at 42238

S&P futures 0.8% at 5850

Nasdaq futures 0.27% at 20920

In Europe

FTSE 0.15% at 8611

DAX 0.55% at 23595

• US CPI eases to 2.3% YoY vs 2.4% expected
• The market sees the first rate cut in September
• Trump prepares to ease Saudi Arabia’s access to chips
• Oil extends gains on trade war de-escalation

Stocks rise as CPI cools to 2.3%

U.S. stocks are set to open broadly higher after US inflation cooled by more than expected and as the market continues digesting the de-escalation of the U.S.–China trade war.

US CPI cooled to 2.3% YoY, down from 2.4% in March, below expectations of 2.4%. This marked the slowest pace in inflation since spring 2021, and it was the third month in a row that inflation was cooler than expected.

On a monthly basis, CPI rose by less than expected to 0.2%, up from 0.1%. Core inflation was also cooler than expected at 0.2%. Delving deeper into the figures, food inflation, the category that Trump has been emphasising, was down 0.1%.

Despite the weaker-than-expected data, traders still see the next Federal Reserve rate cut in September, which provides a window within which a clearer view of what tariffs mean for inflation and the economy will likely emerge.

Last week, the Federal Reserve left interest rates unchanged, and Federal Reserve chair Jerome Powell warned that the central bank was in no rush to cut interest rates. Policymakers are keen to see the impact of Trump's trade policies on inflation and the labour market before moving on rates again. Powell warned that trade tariffs could lift both.

Federal Reserve Chair Jerome Powell will speak again later in the week.

The outlook is improving amid cooler inflation (at least for now) and as the US and China de-escalate the trade war after agreeing to lower tariffs to pre-Liberation Day levels.  

Corporate news

Chip stocks are rising after Trump prepares a deal to grant Saudi Arabia more access to advanced semiconductors to increase its data centre capacity.

UnitedHealth is falling 7% premarket after announcing it was suspending its 2025 outlook due to higher-than-expected medical expenditures. UnitedHealth also announced that CEO Andrew Witty was stepping down immediately.

Coinbase has rallied over 9% following the announcement that the crypto trading platform will join the S&P 500 effective before trading on May 19^th. It will replace Discover Financial Services.

Boeing is rising over 1.5% following reports that China has lifted its ban on Boeing deliveries as part of its trade agreement with the US. Domestic airlines and government agencies are being told this week that deliveries can resume.  

S&P 500 forecast – technical analysis.

The S&P 500 recovered from the 4800 low, rising aggressively above the 200 SMA to resistance at 5850, extending gains above Liberation Day levels. The bullish engulfing candle, combined with the  RSI above 50 and below 70, supports further upside. Buyers will look to extend gains above 5850, bringing 6000 into play. Failure at 5850 could see the price fall back to test 5780, the 200 SMA.

FX markets – USD rises, EUR/USD rises

The USD is falling after the inflation report showed CPI cooled more than expected. DXY still holds above 100, but it is down from yesterday's monthly high of 102.00.

The EUR/USD is rising after German economic sentiment surged in May. German ZEW economic sentiment rose to 25.2 from -14, boosted by the prospect of stabilising domestic politics and progress on trade talks. However, Germany’s current situation, a report component, missed forecasts suggesting the near-term sentiment remains fragile.

GBP/USD is rising, capitalising on a softer U.S. dollar, even though unemployment rose to its highest level since 2021. Unemployment rose to 4.5% from 4.4%. Meanwhile, wage growth, including bonuses, is at 5.5%, down from 5.7%, which is still stronger than the 5.2% forecast. Strong wage growth supports the BoE's cautious approach to cutting rates.

Oil extends gains on US-China trade agreement

Oil prices are rising for a fourth straight day as the market continues to weigh up US-China trade development. However, gains are being capped by increasing supply and caution over whether the US and China can agree on a longer-term deal.

News that the US and China agreed to reduce tariffs to pre-liberation day levels for at least 90 days boosted oil prices yesterday. However, with OPEC plus lifting oil output by more than expected, the upside could be limited.