S&P500 Forecast: SPX falls as rate jitters remain

US futures

Dow future -0.85% at 38,092

S&P futures -0.34% at 5250

Nasdaq futures- 0.25% at 18689

In Europe

FTSE 0.36% at 8207

Dax 0.15% at 18500

US GDP was downwardly revised to 1.3%
Treasury yields edge lower after surging yesterday
Kohl slumps 20% after posting a loss and a profit warning for 2025
Oil holds steady ahead of stockpile data

US GDP was downwardly revised to 1.3%

US stocks are set to open lower, extending losses from the previous session. Concerns over high interest rates for longer weigh on investor sentiment ahead of key inflation data tomorrow.

Stocks closed lower yesterday after a surge in treasury yields. However, yesterday's yield rally is pausing for breath as the 10-year treasury note edged below 4.6%. Benchmark yields rallied nearly 15 basis points earlier in the week amid concerns that the Fed will keep interest rates high for longer and after weak demand for 2, 5, and 7-year auctions. Rising bond yields typically reflect expectations for higher interest rates, which in turn means more expensing financing and smaller profit margins for firms.

Amid quieter yield moves, US data is in focus. GDP data shows that the economy expanded at 1.3% in Q1, slightly less than the previously thought 1.6%. Meanwhile, jobless claims rose by 219k, up from 215k the previous week.

The data still shows signs of a robust economy, providing few reasons for the Federal Reserve to start cutting interest rates. Attention now turns to tomorrow's core PCE report, the Fed's preferred gauge for inflation, which could help shed more light on the timing of the central bank's first rate cut.

Fed speakers will also be in focus today after recent comments from Fed officials have been more hawkish. New York Fed President John Williams and Dallas Fed President Lorrie Logan will be speaking later today.

Corporate news

Salesforce is set to open 15% lower after the workplace software group posted its first revenue miss since 2006. The company's EPS was $2.44 versus $2.38 expected, but revenue came in at $9.13 billion, missing the $9.17 billion expected.

Footlocker is set to open over 13% higher after the retailer confirmed guidance for 2024, amid signs of its turnaround plans progressing.

Kohl's is set to open 20% lower after the department store chain posted an unexpected Q1 loss and issued a 2025 profit warning. The firm posted a loss per share of $0.24 on revenue of $3.18 billion, below the $3.34 billion expected.

S&P 500 forecast – technical analysis.

The S&P 500 broke below the 5277 support and is steadying around 5250. The longer lower wick on today’s candle suggests little selling demand at those lower levels. Sellers, supported by the bearish crossover on the MACD, will look to extend the selloff below 5235, today’s low, towards 5200. Meanwhile, buyers will look to rise back above 5277 to bring 5350 back into focus.

FX markets – USD falls, EUR/USD rises

The USD is falling, giving back yesterday's gains after the downward revision in GDP data and as treasury yields ease. Fed speakers later in the session, and core PCE data will move into focus.

EUR/USD is rising as the EUR is capitalising on the US dollar's weakness as risk appetite improves. Eurozone data showed that economic sentiment in the region improved, rising to 96 in May, up from 95.6, and consumer confidence held steady at -14.3. Attention will be on eurozone inflation data tomorrow, which comes after hotter-than-expected German inflation data yesterday.

USD/JPY is falling to a weekly low on USD weakness, as US bond yields cool and after solid demand for Japanese government bond auctions. Nervousness about the 158 levels could also be present, with the threat of intervention looming in the background.

Oil holds steady ahead of oil stockpile data.

Oil prices held steady on Thursday ahead of the US crude oil stockpile, inflation data, and the OPEC+ meeting.

US crude oil inventories fell by 6.49 million barrels, more than the 1.9 million barrel forecast, according to API data from the US EIA, which are due later today.

However, the larger draw reflecting solid demand wasn't enough to lift prices, with optimism being offset by concerns of high interest rates for longer-hitting risk sentiment. The market will look to US core PCE data tomorrow for further clues over when the Fed might start cutting rates.

Meanwhile, OPEC+ will meet on June 2nd to decide future output. Expectations are for the oil cartel to extend production cuts potentially until the end of Q3 to continue supporting prices.

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