S&P500 Forecast: SPX starts the new month on the front foot

US futures

Dow future -0.05% at 38,684

S&P futures 0.24% at 5293

Nasdaq futures 0.45% at 18639

In Europe

FTSE 0.36% at 8308

Dax 1% at 18679

US stocks rise after gains across May
A busy US economic calendar could inject volatility into price action
OPEC+ extended production cuts to the end of 2015
GameStop & Nvidia rise

Stocks point higher ahead of a busy week

U.S. stocks are set to open higher, kicking off June trading positively as mega caps look set to recover some of Friday's losses.

The tech sector closed lower on Friday, with the Nasdaq 100 underperforming its peers as investors rebalanced their month-end portfolios. Despite the Nasdaq 100 and the S&P 500 snapping a 5-week winning streak last week, all three of Wall Street's indices booked gains across May.

The S&P rose 4.8% in May, the Dow rose 2.3%, and the tech-heavy NASDAQ gained 7% last month thanks to solid earnings and optimism that the Federal Reserve could cut interest rates soon.

Following Friday's core PCE data, which showed that inflation remained sticky but consumer spending slowed, the market increased rate cut expectations slightly. The market now expects the Fed to cut rates by 37 basis points this year, with a 53% probability of rate cuts starting in September, up from 49% before Friday’s core PCE data.

Price action was relatively quiet last week but could pick up this week with a busy economic calendar with ISM services and manufacturing PMIs, factory orders, as well as Friday's non-farm payroll report in focus.

Corporate news

Nvidia is set to open higher after chief executive Jensen Huang unveiled the latest round of AI upgrades. The company, best known for its AI data center systems, introduced new tools and software models on the eve of the Computex trade show in Taiwan.

GameStop is set to open 80% higher after Keith Gill, also known as Deep- F value on Reddit, posted a screenshot of a $116 million investment in the stock. The screenshot shows 5 million shares bought at $21.27 a piece - the first post in three years on the account.

S&P 500 forecast – technical analysis.

After running into support at 5190, the S&P 500 has rebounded higher, retaking resistance at 5277 as the price heads towards the 5300 round number and on to 5350 and fresh ATHs. On the downside, sellers will need to break back below 5277 to bring 5200 back into focus.

FX markets – USD holds steady, GBP/USD falls

The USD continues in a holding pattern after inflation data and as the market looks ahead to a busy week for economic releases, which could provide more clues about when the Fed may start to cut rates.

EUR/USD is holding steady around 1.0850 after the eurozone manufacturing PMI was downwardly revised to 47.3 from 47.4. Although this was still up from 45.7 in April, it suggests that the region’s downturn was slowing. The data comes ahead of Thursday's ECB rate decision, where the central bank is expected to cut rates by 25 basis points. Given the uptick in inflation and record-low unemployment, policymakers could still adopt a hawkish tone, which could support the EUR.

GBP/USD is falling after starting a downward revision to the UK manufacturing PMI to 51.2, down from 51.3. However, this is still up from 49.1 in April and marked the second time in two years that manufacturing returned to expansionary territory. The data showed that new orders and output expanded at the fastest pace in 2022.

Oil holds steady after OPEC+ extends oil production cuts

Oil prices are holding steady after the OPEC+ meeting over the weekend, which had little impact on oil prices and as the market weighed up the demand outlook.

The oil group agreed to extend oil output cuts into 2025; however, the group also plans to phase out voluntary output cuts between October 2024 on September 2025

The planned phase-out of voluntary cuts comes up at a time when there are questions over the demand outlook as a high-interest rate environment in the US could dampen economic growth in the region.

Meanwhile, the official Chinese manufacturing PMI was stronger than expected at 51.5 in May. This contrasts strongly with the official China manufacturing PMI, which showed a contraction in May. China is the world's largest importer of oil, so changes in the manufacturing sector can impact the demand outlook.

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