Nasdaq Index, Dow Jones, S&P 500 News: Bullish Momentum for Q2 After Strong Q1 Performance

Market Outlook: Bullish Trends in Q2 Amid Inflation and Fed Policies

US Stock Index futures are modestly higher on Monday at the outset of Q2, building on a strong first quarter. The S&P 500 recorded a notable 10.2% jump, its best Q1 showing since 2019. The Dow Jones Industrial Average and Nasdaq Composite also posted gains of 5.6% and 9.1%, respectively. March marked the fifth consecutive month of positive momentum, with the Dow closing just shy of the 40,000 threshold at 39,807.37.

At 11:55 GMT, Dow Futures are trading 40276.00, up 100.00 or +0.25%. S&P 500 Index futures are at 5323.50, up 15.00 or +0.28% and Nasdaq-100 Index futures are trading 18541.50, up 66.50 or +0.36%.

Inflation Data and Federal Reserve’s Stance

The focus on U.S. inflation data continues. February’s personal consumption expenditures (PCE) index, a key measure for the Fed, showed a 2.8% increase, aligning with market expectations. This slow inflation progression suggests a cautious approach from the Fed regarding rate cuts. The CME Group’s FedWatch Tool indicates a 55% likelihood of a rate cut in June, suggesting a hold in May.

Fed Governor’s Insights and Market Implications

Fed Governor Christopher Waller emphasized the prudence of maintaining the current rate to manage inflation effectively. This stance, hinting at a potential extension of higher rates, aligns with market predictions of limited rate cuts in the near term.

Sector Highlights: AI Stocks and Tesla’s Movement

Artificial intelligence stocks, particularly Nvidia, have been pivotal in driving market optimism. Furthermore, Tesla’s share prices increased slightly following a price bump in its Model Y line, despite overall pressure on the electric vehicle sector.

Upcoming Economic Data and Historical Trends

The market is bracing for upcoming economic data releases, including construction spending and ISM manufacturing data. Historical patterns suggest a continuation of the bullish trend, with the S&P historically ending higher when it gains 10% or more in Q1.

Short-Term Market Forecast

Considering the steady Q1 performance, ongoing sector strengths, and the Federal Reserve’s rate strategy, the market outlook for the short term appears bullish. However, traders should closely monitor upcoming economic data and Fed policies for potential shifts in this trend.

Technical Analysis

The benchmark E-mini S&P 500 Index is trending higher for a third staight session Monday in addition to hitting another record high. The strong upside momentum has put the upper end of a rising wedge at 5365.75 on the radar.

On the downside, the key support is a short-term bottom at 5263.00, followed by  the lower end of  rising wedge at 5257.50.