Futures on US stock indices rose in morning trading but then quickly lost momentum. Traders are cautious ahead of the upcoming meetings of central banks. A rapid decline from weekly highs undermined the uptrend. However, the S&P 500 index night resume an upward movement. With the pace of inflation still proving sticky, the majority of investors expect the Fed to take a pause in monetary tightening this week. The heavy-tech Nasdaq 100 also added gains.
The US will unveil the inflation report on Tuesday. The Fed will announce its rate decision on Wednesday. Despite the expectations of a pause in June, another increase is expected in July this year. However, some economists believe that the regulator could raise the key rate in June.
Last week, the Bank of Canada and the Reserve Bank of Australia unexpectedly hiked rates. It came as a surprise to traders. The ECB is likely to raise its benchmark rate on Thursday. The Bank of Japan is expected to keep the interest rate unchanged on Friday.
Shares of energy companies incurred the biggest losses in European trading as oil prices fell amid lingering concerns about demand. Goldman Sachs slashed its forecast for oil prices by nearly 10%, citing weak demand in China and an increased supply from sanctioned countries. Shell Plc and BP Plc shares declined by more than 1%. Stocks of mining companies also dipped after iron ore prices slid by almost 5% due to concerns about the weakness of China's property industry.
Top Wall Street strategists voiced different opinions about the movements of the S&P 500. Goldman Sachs expects the index to climb as other sectors are likely to catch up with the rapid rally in the tech sector. Morgan Stanley points to the example of the bear market of the 1940s when the S&P 500 rallied 24% before returning to a new low.
As for the technical outlook of the S&P 500, demand remains high. The uptrend is likely to continue. However, bulls need to defend $4,290. After that, the index could return to $4,320. They also need to take control of $4,370, which will boost the bull market. In case of a downward movement due to risk aversion before the Fed meeting, bulls need to protect $4,255 and $4,230. A breakout below these levels could trigger a drop to $4,175 and $4,143.
