S&P 500 outlook: Stocks rise after strong data & on debt ceiling optimism

US futures

Dow futures +0.07% at 32780

S&P futures +0.08% at 4150

Nasdaq futures +0.24% at 13912

In Europe

FTSE +0.08% at 7609

Dax +0.31% at 15858

• Strong data fuels hawkish Fed bets
• US core PCE rises to 4.7%, personal spending jumps
• USD rises off sessions lows
• Oil points to a weekly gain

Core PCE rises, personal spending jumps

US stocks are pointing to a modestly higher start as investors digest a slew of U.S. economic data as well as the latest developments in negotiations to lift the US debt ceiling.

US core PCE, the Fed’s preferred inflation gauge, unexpectedly ticked higher in April to 4.7% up from 4.6% in March. Personal spending was also hotter than expected at 0.8%, up from 0.1% in March and double the 0.4% expected.

Durable goods orders also impressed and surprised to the upside, rising 1.1% and defying expectations of a 1% decline.

The upbeat data comes following an upward revision to USD Q1 GDP data yesterday and better than expected initial jobless claims. The data Feather fuels bets that the Federal Reserve could hike interest rates again in the June meeting. The market is now pricing in an almost 60% expectation of a 25 basis point rate hike in June, up from just 17% a week ago.

Increasingly hawkish fed expectations could limit gains in the US stock market and have helped the US dollar rise from session lows.

Debt ceiling talks are also very much in focus today, with both sides reportedly nearing a deal. Hopes are rising that President Biden and House Speaker Kevin McCarthy may be able to reach a deal this weekend to lift the US debt ceiling and avoid The US defaulting on its debt.

Corporate news

Gap jumped 11% after the retailer posted a surprise profit in Q1 as restructuring efforts bare fruit and supply chain issues ease.

Marvell rises 19% pre-market after the chipmaker reported better-than-expected Q1 results and gave encouraging revenue guidance for the current quarter.

S&P 500 outlook – technical analysis

After rebounding of the 50 sma, the S&P 500 has risen above the 20 SMA. The index continues to trade range-bound, capped by 4100 to the downside and 4180 on the upside. The RSI is rising above 50, keeping buyers optimistic of further gains. But. Buyers could look for a rise over 4180, then to 4215 for a fresh 2023 high. Sellers will be watching for a break below the 20 sma at 4140, to open the door to 4100 the 50 sma.

FX markets – USD rises, EUR falls

The USD is falling but is off session lows and is set to rise across the week. The USD had been supported by safe-haven flows amid US debt ceiling uncertainty and after an upward revision to US GDP fuel

EUR/USD is rising but is set for a weekly loss. ECB Chief Economist Philip Lane has said that he is not worried about sticky inflation and expects, with falling energy prices, that core inflation will follow. His comments come after data yesterday showed that Germany tipped into a recession in Q2.

GBP/USD is Rising after UK retail sales came in stronger than expected, rising 0.5% MoM, up from -1.2% decline in March. Expectations had been for an increase of 0.3%. The data suggests that the UK consumer is holding up despite rising interest rates and high inflation. The market expects another 25 basis point hike in June.

EUR/USD -0.13% at 1.0730

GBP/USD +0.01% at 1.2365

Oil set for a weekly gain

Oil prices are rising after steep losses yesterday and are still on track to book gains of over 1% across the week, marking the second straight weak of gains.

Investors continue weighing up mixed messages from Russia and Saudi Arabia ahead of the OPEC+ policy meeting on June 4^th.

Earlier in the week, the Saudi Arabia energy minister had warned short speculators, which the market interpreted as a clue that OPC+ could cut oil production. However, Russia has pushed back against these expectations, with President Putin saying that oil prices were nearly at economically justified levels.

Attention will now be on U.S. debt ceiling talks, with a deal reportedly in sight. Should a deal be agreed this weekend, oil prices could get a boost.

WTI crude trades +1% at $72.54

Brent trades at +1% at $76.80

Looking ahead

15:00 US Michigan confidence