US 500

S&P analysis: As markets have started Q2 poorly, amid interest rate uncertainty and raised geopolitical risks, investors are relying on earnings to provide boost, starting with Netflix today. S&P 500 technical analysis suggests more losses could be on the way, with 5,000 on the bears' radars.

Tensions surrounding the Middle East has unsettled markets. US indices such as the S&P 500 are on track for their worst week of the year, crude oil reached a fresh YTD high and the risk-off sentiment was even enough to knock gold from its record. Traders therefore need to be on guard for headline risks surrounding the Middle East next week, alongside the usual bouts of economic data and central bank meetings.

S&P 500 analysis: Can the rally continue even as yields rise? Rising crude oil prices pose additional risk to inflation outlook. Technical analysis shows potential crack in bullish trend, but confirmation is still needed.

Can the stock market rally continue after a strong performance in the first quarter? As we start Q2, Chinese PMIs, German CPI and US non-farm payrolls are among the upcoming week’s highlights. S&P 500 technical analysis shows strong bullish trend, pointing to further strength.

The S&P 500 tapped 5k for the first time ever. But do traders have the appetite to extend its trend heading into the weekend? For now, our focus is on a bull flag pattern on the ASX 1-hour chart.

The S&P 500 reached a fresh record high and stopped just 5 points short of the 5,000 milestone thanks to strong earnings. But futures charts and market positioning suggest the S&P cash market could break higher.

The key question today is whether we are near at least a temporary peak in the ongoing phase of the rally, or if we persist in moving forward despite apprehensions about valuations, the developments in the Red Sea, and the postponement of interest rate cuts.

S&P 500 outlook: Hawkish repricing of rate cuts could undermine overstretched equities. Fed Governor Chris Waller says 3 rate cuts appropriate (not 6 the markets are after) which is potentially bearish news. S&P 500 technical analysis suggests index is near extremely over stretched levels.

Consumer confidence rose sharply in December, casting a shadow on early rate cuts and stalling the recent equity market rally aside from continued strength in the Russell 2000. Equity markets and gold still look set to end the year on all-time highs, Bitcoin has close to doubled, with interest rate optimism seemingly pulling forward the traditional January rally.

The rate-sensitive Russell 2000 index led markets higher this morning, pointing to an eighth week of successive market gains as Fed officials continued to quell hope of rate cuts as soon as next March, arguing that policy is not fixed and will be data-driven. We consider the real impact of Fed jawboning on the economy and financial markets. The Bank of Japan held interest rates below zero yesterday, giving no clues as to when it might exit negative levels.

Bullish factors Statements from Federal Reserve officials may want to realign expectations of an interest rate cut by the American central bank after Powell's comments this week triggered a sharp global rally for risky assets, strengthening the American currency. Minutes of the COPOM and Quarterly Inflation Report (RTI, an acronym in Portuguese) should show a more benign external scenario for the Central Bank, maintaining expectations of cuts to the basic interest rate (SELIC), which in turn reduces the attractiveness of Brazilian assets and weakens the real. Bearish factors PCE index should maintain a trend of gradual price moderation in the US and suggest that the Fed has room for monetary easing, increasing bets on interest rate cuts by investors and weakening the American currency. The possibility of advancing important economic agendas for the government in the National Congress can ratchet down the perception of fiscal jeopardy for Brazilian assets and contribute to strengthening the BRL. Due to Christmas and the New Year, the Weekly Exchange Overview will not be published on December 22 and 29, returning on January 5, 2024. Happy Holidays!!!

Last week’s ‘pivot’ rally has inspired some lofty bull market forecasts for equity markets in 2024, but a handful of Fed Governors played Scrooge by downplaying how soon and how far rates could fall. Meanwhile the Bank of Japan could raise rates tomorrow. At home, US housebuilders are getting more optimistic against the backdrop of almost a point decline in mortgage rates.

Gold is consolidating, but it took as positive news the Fed's presumed pivot to no further interest rate increases and possible interest rate reductions. The Fed's interest rate projections, the so-called 'dot plot,' displaying the interest rate projections of individual Federal Open Market Committee (FOMC) members, are now much more closely grouped than they were in September. The technical position looks mixed, but that reflects the hefty drop from a fortnight ago. Any change in the Big Figure around two thousand is bound to attract attention and technical support for gold stands between $1,975 and $2,002 per ounce. Silver's speculative overhang position has been reduced.

‘Buy on the rumor, sell on the news’ appears to be the operative phrase on Wall Street today, with the Russell 2000 off 1.2% and Gold off 0.5% after rallies leading up to and on the announcement of the Fed’s interest rate outlook this week. A statement by the New York Fed President brought a bit of reality to the markets with skeptical comments on any near-term rate cuts.

Gold continues to glitter thanks to sharply declining bond yields, notably a major downward move in the real rate on 10-year TIPS. Other than for a 2% rally in the Russell 2,000, US equities were unchanged. The dollar lost another 1% today, making a 10% decline from its late 2022 high point.

The Fed’s offer of greater than expected rate cuts next year (if inflation behaves) spurred over one percent rallies in the S&P500, NASDAQ and Russell 2000, after being down 0.5% before the news. Bonds rallied strongly, being up over 4% along the curve. Gold jumped close to 2% and hit a new all-time high. The dollar sold off versus all major cross rates.

Oil prices continued to slide, down 4% on fears of weaker economic growth. Today’s inflation data, combined with last week’s employment data, suggests that inflation remains sticky – despite the benefit of lower energy prices. The “group think” on Wall Street is that the Fed must start pivoting early in 2024, but this has been wrong for the past 20 months. Let’s see if the Fed Chair will convincingly reassert his ‘higher for longer’ message tomorrow.