Weekly Summary: NVidia Drags Broad Market Up

The S&P 500 broad market index futures surged by 1.7% to 5067 points, marking a new all-time high. This record was driven by the exceptional Q4 2023 earnings report from NVidia. The chipmaker reported a 265% YoY increase in EPS compared to Q4 2022, and its optimistic forward guidance, particularly in the AI segment, led to a substantial rise in NVidia stocks, pushing the entire market up. NVidia's massive market cap of $1.91 trillion had a significant impact, causing the tech-heavy Nasdaq 100 to jump by more than 2.5%.

Prior to NVidia's corporate release, S&P 500 index futures were down by 1.0% to 4947 points as investors were disappointed by hawkish FOMC minutes, where policymakers called for a delay in further interest rate actions. The February PMI readings came in mixed, with Service PMI falling to 51.3 points (below the expected 52.4 points), while Manufacturing PMI rose to 51.5 points (above the expected 50.5 points).

According to the CME FedWatch Tool, bets on interest rate cuts in March fell to 4.5%, to 24.4% in May after the publication, and June expectations were moderate at 52.8%. The 10-year Treasuries yields remained steady at 4.31-4.33%. It appears that the rise in the stock market was primarily propelled by the NVidia report, as stocks might have been seeking a safe landing otherwise. The duration of this corporate effect is uncertain, but next week could bring more reasons for monetary tightening, with the second U.S. Q4 GDP estimate and the release of the Fed’s preferred inflation gauge, the Personal Expenditure Index (PCE), for January.

The S&P 500 has surpassed the final upside target zone at 4850-4950 points, and missed potential correction opportunities. Nevertheless, betting on a rally before that could be risky. Reversal patterns are anticipated, with the first already emerging, signaling a standard correction of 5-7% within the next five weeks. The starting point of this correction is yet to be defined. But before a next all-time high record is possible.

Oil prices are making another attempt to finally push through the resistance at $81.00-83.00 per barrel for Brent crude benchmark. The ongoing war in the Middle East increases the likelihood of further upside moves in oil prices above $83.00 per barrel in February and March. The next resistance is located at $87.00-92.00 per barrel.

Gold prices, having reached mid-term upside targets at $2000-2100 per troy ounce, are currently retesting the resistance at $2010-2030 per ounce from the downside. If the resistance survives prices could slip to $1920 and further down.

Volatility in the currency market is very high, with expectations of another wave of the upcoming downside correction for the Dollar seen materializing. The Greenback losing around 1.0% on Thursday However, the U.S. Dollar again failed to strengthen further curbed by strong macroeconomic data. This is a sign of weakness. The latest Composite PMI in the United States are weaker than in the Eurozone. However, it remains risky to bet on both the rising and declining EURUSD. A return to the 1.11500-1.12500 area for the pair is likely, but a drop to 1.05000 should not be excluded.