S&P 500 Forecast: SPX rises as Fed's preferred inflation gauge cools

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Fiona Cincotta
By :  ,  Senior Market Analyst

US futures

Dow futures +0.52% at 35439

S&P futures +0.23% at 4575

Nasdaq futures +0.13% at 16108

In Europe

FTSE +0.86% at 7440

Dax +0.4% at 16100

  • Core PCE cools in line with estimates
  • Jobless claims are ahead of estimates at 21k vs 220k forecasts
  • Snowflake jumps after Q3 results
  • Oil rises ahead of the OPEC+ meeting 

Core PCE cools to 3.5% down from 3.7%

U.S. stocks are pointing to a stronger start as investors digest October core PCE figures, the Federal Reserve's preferred gauge for inflation.

Core PCE eased to 3.5% YoY in October from 3.7% previously. On a monthly basis, core PCE rose 0.2%, down from 0.3%—meanwhile, personal spending to 0.2% from 0.7% in September.

This is another Goldilocks data release showing inflation continues to cool and the economy slow, but not too much.

Jobless claims were also stronger than expected at 218k, and last week’s claims were revised lower to 211k. However, continuous claims rose to 1927k, showing that those Americans without jobs were finding it more challenging to find employment.

The data comes after yesterday’s robust GDP data and points to the US heading for a soft landing, keeping sentiment buoyant. The figures also support the view that inflation is continuing to fall, which could lead to rate cuts next year. As a result, equities are set to head higher.

November is set to be a strong month for equities and treasuries. US treasuries are on track for the strongest month since the 1980s on bets that the Federal Reserve is done hiking rates and could start to cut rates next year. The move ignited a jump in equities, led by the NASDAQ 100, up almost 11% this month, marking its best monthly performance since July 2022. While the S&P 500 has risen 8.5%, and the Dow Jones is set to gain 7.2%

Looking ahead, investors will also be listening to comments from Federal officials, with New York Fed president Williams due to speak later today and Federal Reserve chair Jerome Powell tomorrow. Their comments will be watched closely after Federal Reserve governor Christopher Waller hinted towards a dovish pivot earlier in the week.  

Corporate news

Snowflake jumps 9% after beating Q3 earnings estimates. EPS was $0.25 ahead of the consensus of $0.16, and revenue grew 32% annually to $734.2 million, beating forecasts of $713.3 million. After the results, Morgan Stanley analysts raised the price target for the stock to $230 per share.

Microsoft will be in focus after taking a spot on OpenAI's board of directors. This will be a non-voting seat and comes after the chaos surrounding the ousting and rejoining of CEO Sam Altman.

S&P500 forecast – technical analysis

The S&P500 continues to consolidate above 4550 as the bulls pause for breath after a strong rally across November. The receding bullish bias on the MACD and the almost overbought RSI could challenge buyers to book further gains. Buyers would need to rise above 4585, the weekly high to extend gains towards 4600, the July high. Sellers will look for a break below 4550 and 4400 round numbers to negate the near term uptrend.

S&P 500 FORECAST CHART

FX markets – USD rises, EUR/USD falls

The USD is holding onto earlier gains as core PCE cools in line with forecasts, but jobless claims were stronger than expected, highlighting the labor market's resilience.

EUR/USD is falling after eurozone inflation cooled by more than expected to 2.4% in November, down from 2.9% previously and below forecasts of 2.7%. Core inflation also cooled by more than expected to 3.6%. The data boosted bets that the ECB could move to cut interest rates sooner, with the market starting to price in a rate cut from April next year.

The US dollar is driving GBP/USD amid a quiet day for BoE commentary and UK data. The pound has been broadly lifted this week after hawkish commentary from BoE governor Andrew Bailey. He said he'll do whatever is necessary to get inflation back to the 2% target.

EUR/USD -0.36% at 1.0932

GBP/USD -0.45% at 1.2643

 

Oil rises ahead of OPEC+ meeting

Oil prices are rising as investors look ahead to today’s OPEC+ meeting, which is still on track to take place after being postponed from Sunday amid disagreements over output targets. The market is expecting additional production cuts potentially in the region of 1,000,000 barrels per day.

Meanwhile, gains have been limited by concerns over the demand outlook amid slowing growth in China, the world's top oil-importing country. Chinese manufacturing activity contracted for a second straight month and non-manufacturing activity stalled fueling bets that more stimulus is needed. to support the country's economic growth.

Meanwhile, US crude inventories recorded an unexpected 1.6 million barrel build in the week to November 24, raising concerns over demand in the US, the world’s largest oil consumer.

WTI crude trades +1.6% at $77.70

Brent trades +1.51% at $82.54

 

 

 

 

Related tags: US Open USD SPX 500 Oil
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