US equity bulls were injected with fresh inspiration on Wednesday evening after the Federal Reserve minutes struck a less hawkish tone.
Market players took away a message of flexibility on rates from the minutes which soothed fears over the Fed’s overly aggressive stance tipping the economy into recession. The S&P 500 ended the trading session almost 1% higher while the Nasdaq gained roughly 1.5% as tech stocks bounced back. With the Fed essentially signalling room for a pause in rate hikes later this year, this could provide a lifeline to equity bulls – especially after the S&P500 dipped into bear territory last week. While other negative themes could weigh on equity markets, a less hawkish Fed may provide some breathing room for stocks to fight back.
On the data front, it may be worth keeping a close eye on the US GDP report for the first quarter of 2022. Although this will be the second estimate, the report could still provide insight into the health of the largest economy in the world. The GDP report will be complemented with the weekly initial jobless claims. On Friday, it’s all about the US April personal income and spending report, PCE deflator, and consumer sentiment for May.
In regards to the technical perspective, the S&P500 remains bearish on the daily charts despite the rebound this week. There have been consistently lower lows and lower highs while the MACD trades to the downside. Given how the candlesticks are also well below the 50, 100, and 200-day Simple Moving Average, the technicals favour bears. However, a strong daily or weekly close above 4000 could encourage a move higher back towards 4080 and 4100. Should 4000 prove to be tough resistance, the S&P 500 could decline back towards 3880 and 3750, respectively.