S&P500 wipes out year-to-date losses on soft US CPI
Updated Updated Tue, 2025 May 13 09:37
* Lack of tariff headwinds keep US CPI subdued in April
* German investor outlook rebounds sharply on hopes for economy
* Traders model bullish moves for S&P500 with tariff tensions easing
* Dollar falls as inflation whets risk appetite
FX: USD retraced a big part of yesterday’s break higher on weaker than expected US inflation data. Core and headline m/m, and headline y/y came in one-tenth lower than forecast. Fed rate cut bets were pushed back with the first one now seen in September, with a 75% chance, and just two moves priced in for this year. Goldman Sachs shifted the timing of its next expected Fed cut to December from July.The 50-day SMA is resistance at 101.97, with support around 100.61.
EUR regained two-thirds of its losses from Monday. There was mixed German ZEW business survey data with expectations showing a modest positive surprise while the current situation was mildly disappointing.
GBP jumped higher, recapturing all its losses from Monday. The pound outperformed most of its peers and settled back above 1.33. There was limited reaction to UK jobs data that was broadly in line with market expectations, aside from showing a smaller slowdown in average weekly earnings versus the consensus. It seems like the labour market is cooling very gradually.
USD/JPY fell back below 148 and closed on its lows. It remains above support around 147.13 with the 50-day SMA at 146.21. BoJ rhetoric continued to signal future hikes if prices and the economy improved.
AUD was a relative outperformer again as the commodity dollar currencies benefitted from the positive risk sentiment. CAD touched the 200-day SMA at 1.4010 again before pulling back. Markets have faded a good portion of their expectations for near-term Fed cuts while maintaining a decent amount of easing from the BoC.
US stocks: The S&P 500 gained 0.72% to settle at 5,887. The tech-dominated Nasdaq finished up 1.58% at 21,198. The Dow closed 0.64% lower at 42,140. It was a mixed session for Wall Street. Healthcare continued to get sold, down nearly 3% as a sector, with real estate and consumer staples also down more than 1%. Tech led the gains, up 2.25% with consumer discretionary, energy and communication services also adding over 1%. Nvidia jumped 5.6% as the US reportedly weighs letting UAE buy in excess a million advanced chips, according to Bloomberg. Tesla continued its rebound, up 4.9% as CEO Musk said he would like to bring robotaxis to Saudi Arabia. Microsoft was the laggard, mildly in the red on news it is reportedly cutting 3% of its total headcount, though it is not performance related.
Asian stocks: Futures are mixed. Asian markets traded mostly higher after the rally Stateside on the Sino-US de-escalation. The Hang Seng and Shanghai Composite lagged with question marks around the 90-day tariff pause. The Nikkei 225 rallied above 38,000 but gave back some gains on profit taking.
Gold hung in there as it printed an inside day. See below for more.
Day Ahead – Australia Q1 Wage Price Index
The wage price index rose 0.7% in the December quarter, softer than market consensus expectations. Wage inflation continued to moderate with the annual pace down to 3.2% from 3.6% in September, and the peak of 4.2%yr in December 2023. The March quarter is expected to print at 0.8% which keeps the annual pace at 3.2% y/y.
The aussie is currently battling with resistance at the 200-day SMA at 0.6457. The May top is just above at 0.6514. The midpoint of the October-Paril drop is at 0.6427.
Chart of the Day – Gold reversal pattern?
The yellow metal has lost some its shine as the risk mood has picked up sharply in recent weeks. Trade tensions have obviously cooled while the India-Pakistan ceasefire agreement also saw selling of the safe haven asset. Prices topped out at $3,500 in late April but fell back after that spike higher. Another top was made at $3,437 and now sellers have seen support just above $3,200. This is the area where a neckline can be drawn for a double top reversal pattern. If that plays out, then there’s $237+ of downside in a measured move.
