SP500 Defends Major Support

According to Goldman Sachs experts, the Fed may be able to carry out its aggressive rate-hiking agenda without plunging the country into recession.

On the other hand, Morgan Stanley's usually pessimistic Michael Wilson cautioned that falling corporate profit estimates would be the next headwind for US equities, which are expected to decline further before bottoming out during the second-quarter results season.

Inflation remains the most prominent problem

On Friday, May's US CPI data are due, expected to show an 8.2% year-on-year increase, slightly lower than the 8.5% scored in March but still more than four times higher than the Federal Reserve's 2% target.

Inflation is likely to "stall by the end of this year unless the energy or oil prices double again, but a lot of it is already priced in," Shanti Kelemen, chief investment officer at M&G Wealth, said on Bloomberg Television. While the economy is likely to slow, "I don't think the US will flip into a recession this year. I think there is still too much of a tailwind from spending and economic activity."

Short-term seems bullish

As previously mentioned, the critical support now seems to be at 4,100 USD, and as long as the index trades above it, the immediate outlook appears bullish. The next target for bulls could be at last week's highs near 4,200 USD. 

If the price jumped above that level, a more significant relief rally might bring the index to the 4,300 USD area.

On the other hand, if sentiment worsens and bears reappear, the support of 4,100 USD could crack, likely sending the price toward the psychological barrier at 4,000 USD.