Weekly Focus: U.S. GDP, PCE, Big Tech Reporting and Nonfarm Payrolls

Futures for the broad S&P 500 market index are declining by 0.2% to 5,516 points. Following a 4.3% rally last week, such a pullback appears logical. Most importantly, the benchmark should hold above the 5,310–5,410 point range.

There are several important macroeconomic releases this week, beginning on Wednesday. The United States will release a first estimate for Q1 2025 GDP, with expectations of a slowdown to 0.4% quarter-on-quarter from the previous 2.4% quarter-on-quarter. This forecast seems rather optimistic, given that the Atlanta Federal Reserve (Fed) predicts a decline for the first three months of 2025. This data will be followed by the ADP Nonfarm Payrolls for April, with an expected decrease to 123,000 from 155,000. Subsequently, the PCE Index will be released, likely reflecting a slowdown in inflation during March. Overall, these data are expected to demonstrate a significant cooling of the United States economy. This may increase the likelihood of interest rate cuts by the Federal Reserve. However, the cooling of the American economy should not be too severe, in order to avoid heightening fears of a recession.

Q1 2025 corporate reports this week are expected to bring further positivity to the market, pushing Treasury yields lower. This would raise stock valuations, while increasing corporate revenues would further boost estimates. This week, 180 companies listed on the S&P 500 index are scheduled to report. Two technology giants – Microsoft (MSFT) and Meta Platforms (META) – will report after hours on Wednesday, while another two from the so-called "Magnificent Seven" – Apple (AAPL) and Amazon (AMZN) – will report after the closing bell on Thursday. According to FactSet, approximately 73% of S&P 500 companies are expected to exceed analysts' consensus forecasts this quarter, compared to an average of 77% over the past five years. Banks, Netflix, and Alphabet have already initiated a promising series of positive reports, which may prompt other major technology firms to present strong results as well. This could enable the S&P 500 index to fully recover the 14% decline experienced in April, potentially returning to the 5,600 level.

The U.S. business activity reading for April will be released on Thursday, with a mixed consensus expected. The week will conclude with the U.S. labour market report for April. Analysts also anticipate a degree of cooling in the labour market, underscoring the broader slowdown in the American economy.

Large investors have unexpectedly shifted towards protective tactics. The SPDR S&P 500 ETF Trust (SPY) reported final outflows of $1.7 billion last week, sharply down from net inflows of $4.1 billion the previous week, excluding Friday. This is a concerning development, as large investors appear to be abandoning long positions.

From a technical perspective, the S&P 500 outlook remains unchanged, with near-term upside targets between 5,310 and 5,410 points already surpassed. This has opened the way to extreme upside targets at 5,750–5,850 points. The nearest resistance is located at 5,580–5,600 points, while support is seen at 5,480–5,500 points.

Brent crude oil prices briefly touched the resistance zone of $67–69 per barrel before pulling back. Whilst short-term corrections are anticipated, medium-term projections still point towards a rebound to $74–75 per barrel. Key support is identified between $57 and $59.

Gold surged to a fresh high of $3,499 per troy ounce on safe-haven demand. However, a strong pullback last week pushed prices down by 6.3% to $3,281 per ounce. Support lies between $3,250 and $3,280, with resistance at $3,350–3,380. A broader technical correction towards $3,000 remains a possibility.

The U.S. Dollar is stabilising for consolidation after a period of strengthening. The EURUSD is trading at 1.13510. A de-escalation in global trade tensions, particularly between the United States and China, is playing a role. The EURUSD may undergo a sharp correction, with downside targets between 1.0600 and 1.0700 in the coming months, and short-term targets between 1.10500 and 1.11500.