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  • Weekly Summary: S&P 500 Record Series Ahead of the Fed Meeting

Weekly Summary: S&P 500 Record Series Ahead of the Fed Meeting

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.