NASDAQ Index, SP500, Dow Jones Forecasts – Stocks Test Historic Highs After CPI Report

SP500

SP500 rallied as traders reacted to the inflation report. Inflation Rate declined from 3.5% in March to 3.4% in April, while Core Inflation Rate decreased from 3.8% to 3.6%. Traders were worried that Inflation Rate would exceed expectations, so they rushed to buy stocks after the release of the encouraging report. Treasury yields moved lower as bond traders bet that Fed may start cutting rates sooner than previously expected. The yield of 2-year Treasuries settled below the 4.70% level, while the yield of 10-year Treasuries pulled back towards 4.35%. Traders also focused on the Retail Sales report, which indicated that Retail Sales were unchanged in April. NAHB Housing Market Index declined from 51 in April to 45 in May, compared to analyst consensus of 51. The general market sentiment was extremely bullish due to changes in Fed policy outlook, so SP500 tested historic highs.

SP500 moved above the resistance at 5270 – 5280 and is trying to settle above the 5300 level. In case this attempt is successful, it will head towards the 5350 level. Traders should note that RSI is in the extremely overbought territory, so the risks of a pullback are increasing.

NASDAQ

NASDAQ rallied above the key resistance at 18,300 – 18,400 as demand for tech stocks increased after the release of inflation data. AI leaders like Advanced Micro Devices and NVIDIA were among the biggest gainers in the NASDAQ index today.

Not surprisingly, NASDAQ is overbought, which is a typical situation for a strong move. Technically, NASDAQ is heading towards the 19,000 level.

Dow Jones

Dow Jones moved towards the key resistance at 39,900 – 40,000. The index did not manage to test historic highs due to pullbacks in Disney, Nike, and Boeing stocks.

Dow Jones needs to settle above the 40,000 level to gain additional upside momentum. RSI is in the overbought territory but remains below recent highs, so there is enough room to gain momentum in case the right catalysts emerge.

For a look at all of today’s economic events, check out our economic calendar.