S&P500 Price Forecast: Record Highs Amid Dovish Fed and Tech Surge
Despite the downbeat US data, global market sentiment has been gaining momentum and contributing to the bullish performance of the S&P 500, which has been hitting record highs recently.
The Fed’s dovish stance, which typically boosts the S&P 500 and raises stock prices due to lower interest rates, increased risk appetite, and a weaker dollar, is largely to blame for this surge.
Furthermore, the strong performance of the technology sector was seen as another key factor that lent some support to the S&P 500.
Federal Reserve Dovish Stance and Economic Indicators Impact on S&P 500 Outlook
On the US front, Federal Reserve officials are exercising caution regarding monetary policy. Austan Goolsbee believes current interest rates may be too high, indicating a potential need for a reduction.
Lorie Logan proposes slowing the reduction of the Fed’s balance sheet to maintain supportive monetary conditions. Adriana Kugler prioritizes addressing low inflation levels. Thomas Barkin anticipates a decrease in inflation, suggesting current high levels are temporary.
Christopher Waller aims to increase the Fed’s short-term Treasury holdings to influence short-term interest rates. On the data front, the latest ISM survey revealed a faster-than-expected contraction in US manufacturing activity in February, with employment hitting a seven-month low.
The New Orders Index decreased to 49.2 from 49.1 in January, which caused the ISM Manufacturing Index to drop to 47.8. Meanwhile, the Price Paid Index dipped slightly to 52.5. In addition, the University of Michigan’s Consumer Sentiment Index fell short of expectations, declining to 76.9 for February.
However, inflation expectations remained in line with forecasts. These indicators suggest ongoing challenges in both the manufacturing sector and consumer sentiment, potentially impacting economic growth.
Investors might therefore view the Federal Reserve officials’ dovish stance as favorable because it may support corporate earnings and economic growth. This could buoy the S&P 500 index, especially if market participants interpret the Fed’s stance as supportive of risky assets.
Impact of Gaza Crisis on Investor Sentiment and S&P 500 Performance
On the geopolitical front, the situation in Gaza remains horrifying, with the number of children dying from malnutrition and inadequate medical care rising to 16.
The Health Ministry in Gaza reports that Israeli forces opened fire on people seeking aid in Gaza City, leading to more casualties. Vice President Kamala Harris has called for an immediate ceasefire in Gaza, though she stopped short of demanding a permanent end to Israel’s assault.
Hamas is reportedly working to reach an agreement in Egypt, while Israel has decided not to send its delegation. The death toll in Gaza since October 7 now stands at 30,534 Palestinians killed and 71,920 wounded, while in Israel, 1,139 people have died from the October 7 Hamas attacks.
Therefore, the ongoing crisis in Gaza, marked by tragic casualties and calls for a ceasefire, introduces uncertainty, potentially impacting investor sentiment and contributing to market volatility, which could influence the performance of the S&P 500.
S&P500 (SPX) Price Forecast: Technical Outlook
The S&P500 (SPX) demonstrated strength, trading near $5,137, indicating positive market sentiment. Hovering slightly below the pivot point of $5,140, the index is at a crucial point. Failure to break through this level could lead to a downward adjustment, with potential drops to support levels at $5,110, $5,090, and down to $5,060.
Conversely, surpassing the first resistance at $5,164, and then $5,184 and $5,210, may shift the momentum to a bullish phase.
The Relative Strength Index (RSI) at 48 and the 50-day and 100-day Exponential Moving Averages (EMAs) at $5,051.90 and $5,018.89, respectively, suggest the market is at a tipping point.
Ultimately, the direction of the S&P 500 will depend on its capacity to cross the significant $5,141.33 level, which will determine whether it continues to rise or undergo a correction.
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