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  • Weekly Focus: Fed Meeting, the “Magnificent Seven” and Nonfarm Payrolls

Weekly Focus: Fed Meeting, the “Magnificent Seven” and Nonfarm Payrolls

The S&P 500 broad market index futures rose 0.1% to 4891 points this week. The benchmark has set a new all-time high at 4907 points last Friday. This is the sixth consecutive record.

The PCE Index confirmed analysts’ expectations with 2.6% YoY and 0.2% MoM in December. Core PCE, calculated excluding volatile food and energy prices, was even lower at 2.9% compared to 3.2% in November. This unexpected decline pushed stocks to new highs.

Bets on the interest rates cut by the Federal Reserve (Fed) in March rose to 48.2% from 43.0%. This is much lower than 73.0% two weeks ago, but even these developments may eventually result in the return to the idea of first interest rates cuts in March.

The labour market report in the United States that could significantly affect these bets will be released on Friday. But before that two major events may also change the market landscape dramatically. First, some of the “Magnificent seven” of the largest tech companies will present their Q4 2023 earnings reports. Microsoft (MSFT) and Alphabet (GOOG) will report on Tuesday, while Apple (AAPL), Amazon (AMZN), and Meta Platforms (META) will follow on Thursday. Wall Street is expecting their results above average, with the exception of Apple that is under pressure due to lower iPhone sales in China. Positive reporting could cushion hawkish expectations from the Fed’s meeting on Wednesday. Strong economic data and recent hawkish comments from Fed officials may result in moderately hawkish rhetoric by the Fed this time. The regulator has to cool down interest rates cuts expectations while supporting debt and stock markets. This will allow policymakers to have two options in March. If the economy will slow down, the Fed may lower its rates to 5.25% from the current 5.50%. If the economy continues to expand in a robust manner, it may leave its interest rates unchanged.

The S&P 500 index may post new records amid capital inflows in the SPDR S&P 500 ETF Trust (SPY), which were recorded last week for the first time during the last five weeks. The labour market report may create elevated volatility in the end of the week.

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. Besides, oil production in the United States fell by more than 1 million barrels per day to 12.3 million bpd amid severe winter storms. Oil inventories dropped by 9.2 million barrels, which largely contributed to high oil prices. Prices already hit the resistance at $82.00-84.00 per barrel. The next resistance is located at $92.00-94.00 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 currency market is mostly unchanged. 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 moves to the 1.11500-1.12500 area, it will create good short opportunities.