Market volatility looks set to remain elevated as wild swings in Bitcoin, which soured risk appetite last week, could continue to create a drag on the broader market for the week. It will be also be a relatively busy week regarding US economic data as investors will be watching reports for April on personal spending (PCE Index), durable goods and home sales to gauge the strength of the economy as the second quarter got underway. Earnings season is winding down, but there are still some retailers left to report.
Fed Governor Lael Brainard is also set to speak about digital currencies at the virtual Consensus by CoinDesk Conference later today; given recent volatility in the cryptocurrency market her comments will be closely watched.
On the political front, US President Biden’s full fiscal 2022 budget proposal will be released on May 28 and will provide detailed information on the programs Biden wants to expand or cut – from foreign aid to immigration and policing.
Here is what you need to know to start your week.
The benchmark index ($SPX) further its losses for May, losing -0.40% (-16.9 points), during the week.
$SPX have a second failure attempt to break the immediate support of 4,110 on Wednesday, setting another high volume sessional day at its immediate support level that was highlighted last week, It is worth to note that over the past 2 weeks of volatility in its price action, $SPX remains trading within a sideway box range channel. A breakout of this box range will likely infuse clarity on its short term trading direction in the upcoming month.
The immediate support to watch for $SPX remains at 4,110 level, a minor support turned major support level, coinciding with its 50DMA.
Market rotation
Investors have been spooked by concerns about the future path of Fed policy in the face of rising inflationary risks. Last week’s Fed minutes suggested some policymakers were ready to talk about reducing stimulus by tapering bond purchases.
Analysts expect the rotation out of growth and into value to continue as the economic recovery takes greater hold.
Bitcoin whipsawed
The world’s largest cryptocurrency extended losses on Friday after China announced it will crack down on Bitcoin mining and trading activities. Earlier in the week Chinese industry bodies tightened a ban on banks and payment companies providing crypto-related services.
Separately, the U.S. Treasury Department on Thursday called for new rules that would require large cryptocurrency transfers to be reported to the Internal Revenue Service and the Federal Reserve flagged the risks cryptocurrencies posed to financial stability.
Since hitting an all-time high just under $65,000 in mid-April, Bitcoin has fallen sharply, but it has regained some ground after plunging to almost $30,000 last Wednesday.
Earnings
Earnings season is continuing to wind down but there are still some retailers left to report, most notably Best Buy ($BBY), Costco ($COST), and Nordstrom ($JWN).
Other companies reporting earnings include NVIDIA ($NVDA), Salesforce.com ($CRM), and Dell Technologies ($DELL) along with Toll Brothers ($TOL), Cracker Barrel ($CBRL), Autodesk ($ADSK), Dollar General ($DG), Dollar Tree ($DLTR) and Medtronic ($MDT).
Economic data (PCE Index)
The key data to watch in the coming week will be Friday’s personal income and spending data, which includes the personal consumption expenditures (PCE) index. The core PCE, excluding food and energy, is the Fed’s preferred inflation measure for its 2% flexible average target. It was up 1.8% in the 12 months to March.
The data could test the Fed’s resolve to keep up asset purchases at their current pace in the face of an economic and inflation rebound.
