S&P 500 Index: Can US Stocks Extend Gains After CPI Data Today?

Stocks Hold Gains as Iran Ceasefire Calms Oil Fears, CPI Data Ahead

Futures are barely moving early Friday but that’s not a bad thing after the week stocks just had. The ceasefire between the U.S. and Iran is holding and that’s kept the fear out of the market. Thursday’s gains pushed the S&P 500 up 3.68% for the week and the Nasdaq up 4.31%. The S&P 500 rose 0.62% on Thursday, the Nasdaq gained 0.83% and the Dow Jones Industrial Average climbed 0.58%.

Oil Pulls Back but Middle East Risk Lingers

WTI crude briefly pushed above $100 a barrel before pulling back to $98.66. Brent crude settled around $96. The fact that oil is off the highs is giving investors confidence that energy costs could ease over the next few months. When oil comes down, it costs less to run a business and less to fill a tank. That’s good for the economy and good for stocks. The risk is still there though. The Middle East situation hasn’t been resolved and one bad headline could send oil right back up.

Global Markets Getting a Lift From Ceasefire Optimism

Asia followed the U.S. higher. Japan’s Nikkei 225 gained 1.75% and China’s CSI 300 rose 0.6%. Japan said it will release oil reserves to help keep supply steady. China reported better inflation numbers, which is a sign its economy is on solid footing. The mood across global markets is cautiously positive but nobody is declaring victory yet.

CPI Data Could Make or Break the Rally

The March Consumer Price Index report is the big number today. Economists expect inflation to rise about 0.84% from February and come in around 3.25% higher than a year ago. Most of that increase is coming from higher energy prices. Core inflation, which takes out food and energy costs, is expected to be much lower, somewhere between 0.20% and 0.30%.

The Federal Reserve is almost certain to hold rates steady for now. They want to see how energy prices affect the rest of the economy before making any moves. Today’s CPI number will tell them whether they have more time to wait or whether inflation is becoming a bigger problem than they thought.

Technical Outlook

This week’s gap above several swing tops and a couple of moving averages turned the S&P 500 Index (SPX) trend to up earlier this week, solidifying 6316.91 as the new main bottom.

The nearest support is the 50-day moving average at 6765.19. The 200-day moving average provides support at 6658.99.

Near-term retracement zone support is 6740.47 to 6659.60. Long-term retracement zone support is 6566.52 to 6483.01.

On the upside, this week’s momentum has put the SPX in a position to challenge previous main tops at 6952.51, 6993.48 and the record high at 7002.28.

Market Forecast

The setup going into Friday’s open is positive. Oil is off the highs, the ceasefire is holding and the weekly momentum is strong. As long as those three things stay in place the market has room to extend the gains.

The risk is straightforward. Oil spikes again or CPI comes in hot and the picture changes fast. The Fed stays on hold either way but a bad inflation number puts rate cuts further out of reach and that starts to weigh on growth stocks.

Technically the 50-day and 200-day moving averages are the levels to watch. The S&P 500 Index is holding above both right now. That’s the line between a market that keeps running and one that stalls out.

More Information in our Economic Calendar.