Inside Markets — SPX Resistance

The SPX is testing near-term resistance at 5119.  A sustained break above that level would shelve our tactically bearish outlook.  Many stocks have flashed reversal signals and now lifting from short-term oversold levels.

Increased capex guidance from GOOGL, META and MSFT adds incremental conviction to our AI-arms race call from Q1’23. 

 We’re hopeful the disinflationary implications from US April flash PMIs (earlier in the week) pass through to April CPI and PPI prints due mid-May.  Real yields are currently sitting at an all-time high and will eventually unwind.  This can happen by lower nominal yields or higher inflation expectations.  A cooler-than-feared inflation print would increase the probability and scope of rate cuts priced in OIS markets, take nominal yields lower, reestablish the ‘Fed put’ and backstop equity markets.  In our opinion, the all-time high in real yields represents peak inflation fears and a respite from the Q1 inflation trend would be a significant, positive catalyst.