The S&P 500 broad market index futures
added 0.7% to 4875 points this week. Futures prices were higher at 4905 points,
rising by 1.3% on Wednesday. The S&P 500 index itself was moving up
smoothly with four consecutive records. So, the index has established a series
of 5 records in a row if Friday 19 is included.
Investors preferred to focus on positive news
while ignoring negative developments. Netflix (NFLX) and Tesla (TSLA) stocks
prices are moving in opposite directions after Q4 earning reports. Netflix has
surprised with an outstanding rise in new subscriptions that pushed its stocks
up by 14.0%. In contrast, Tesla stocks plunged by 13% after Elon Musk's warning
that the EV carmaker could disappoint with lower growth in sales this year
despite lower prices.
The U.S. economy justified its strength with a
series of optimistic data. Manufacturing PMI in January rose to 50.3 points,
which means an expansion of the economy. Services PMI was also higher at 52.9 points
compared to 51.4 points in December. U.S. GDP increased to 3.3% QoQ in Q4 2023,
which is an outstanding result compared to the 2.0% consensus and 2.4%
according to Atlanta Fed GDPNow modeling. It could seem that the United States
is setting a new pace of growth, securing its global economic leadership.
Surprisingly, bets on interest rates cuts by
the Federal Reserve (Fed) in March were growing to 50.0% on Thursday from
40.4%. The U.S. 10-year Treasuries yields rolled back to 4.10% from 4.15%. The
decline of GDP Price index to 1.5% in Q4 2024 could be a reason for such
optimism. Investors may see other reasons that would force the Fed to lower its
fund rates. The next meeting of the regulator on January 31 would be very
interesting in this regard.
The Fed’s favorite PCE Price index continues
to slow down. Unexpectedly, Core PCE declined to 2.9% YoY in December, beating
the 3.0% YoY consensus, down from 3.2% in November. The headline PCE Price
Index was at 2.6% YoY and 0.2% MoM in December, as was expected.
The S&P 500 broad market index is on the
brink of reaching new all-time highs, having reached the final upside target at
4850-4950 points. While potential reversal patterns should be anticipated, the
first has emerged already. It signals a standard correction of 5-7% within the
next two months. The starting point of this correction is not yet defined.
Oil prices jumped up after consolidation below
$80.00 per barrel for Brent crude. Ongoing tensions in the Middle East are
driving prices higher. The nearest resistance is at $83.00-85.00 per barrel.
Gold prices, which previously reached mid-term
upside targets at $2000-2100 per troy ounce, are currently testing the support
at $2010-2030 per ounce. A potential technical weakness period could lead gold
prices to $1920 if the support at $2010 per ounce is breached.
The Greenback is recovering amid rising volatility
in the currency market. Still, another wave of the upcoming downside correction
for the Dollar is expected. It is risky to bet on the rising EURUSD, but if the
pair will move to the 1.11500-1.12500 area, it will create good short
opportunities.