The S&P 500 Charges Higher On Promise Of AI Tech

The fourth trading week of May 2023 had started out to be a gloomy one for the S&P 500 (Index: SPX). Several Federal Reserve officials signaled early in the week they were considering continuing the Fed's ongoing series of rate hikes in June because of their concerns U.S. inflation has not sufficiently abated.

That potential was enough to send the index down nearly 1.9% from the previous week's close by Wednesday, 24 May 2023.

But the fear that dragged stock prices down reversed during the next two trading days, as an "Unprecedented. Cosmological. Unfathomable." earnings report and outlook from Nvidia (NASDAQ: NVDA) sparked a speculative fury benefiting information technology firms advancing on the potential of their new Artificial Intelligence (AI) systems.

That speculative fury drove the level of the S&P 500 some 2.2% higher from where it bottomed, enough to boost the index by 0.3% from the previous week's close to 4205.45, its highest level to date in 2023. And that was *despite* Friday, 26 May 2023's confirmation U.S. inflation is running hotter than expected, all but guaranteeing the Fed will hike the Federal Funds Rate in June 2023.

That volatile action is shown in the latest update to the alternative futures chart, where we find the index' trajectory is still well within the redzone forecast range.

Alternative Futures - S&P 500 - 2023Q2 - Standard Model (m=+1.5 from 9 March 2023) - Snapshot on 26 May 2023

More stuff happened during the week that was, which we've captured in the week's market-moving headlines. Once again, we've all but omitted headlines related to the debt ceiling debate in the U.S., which still isn't moving the needle for stock prices in any meaningful way.

Monday, 22 May 2023

Tuesday, 23 May 2023

Wednesday, 24 May 2023

Thursday, 25 May 2023

Friday, 26 May 2023

Following personal consumption expenditure data that revealed higher than expected inflation, the CME Group's FedWatch Tool now projects the Federal Reserve will hike the Federal Funds Rate by a quarter point when its Open Market Committee meets on 14 June 2023. That would bring the Federal Funds Rate to a target range of 5.25-5.50%, which the tool anticipates will be the peak for the series of rate hikes that began in March 2022. However, the FedWatch Tool anticipates the Fed will then wait until its 1 November (2023-Q4) meeting to initiate a series of quarter point rate cuts at six-to-twelve-week intervals to address building recessionary conditions in the U.S. economy.

The Atlanta Fed's GDPNow tool estimate of the real GDP growth rate for 2023-Q2 plunged to +1.9% from the +2.9% growth rate it anticipated a week earlier.

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