Markets React to Fed Signals, S&P 500 Extends Winning Streak

On Monday, global financial markets experienced mixed movements as investors reacted to nuanced signals from the Federal Reserve regarding potential interest rate cuts in 2024. The MSCI global equity index showed a slight increase, oil prices surged due to supply concerns, and U.S. Treasury yields rose. U.S. stocks, particularly in Consumer Services, Oil & Gas, and Technology sectors, gained ground amid growing expectations of future interest rate cuts.

The S&P 500 closed higher, extending Wall Street's winning streak to seven weeks, marking the longest such run since 2017. The index is now just 1.2% below its all-time closing high. Despite attempts by Federal Reserve officials to temper expectations for imminent rate cuts, optimism regarding policy changes in 2024 persisted.

Notable stock movements included United States Steel's remarkable 26.1% jump to a 12-year high after Japan's Nippon Steel announced a $14.9 billion deal to acquire the U.S. steelmaker. On the technology front, Adobe Systems' stock rose 2.5%, while Apple faced a 0.9% dip due to China's ban on iPhones and other foreign-made gadgets and a patent dispute impacting Apple Watch sales.

Goldman Sachs revised its 2024 S&P 500 target upward by 8% to 5,100, citing expectations of falling inflation and declining interest rates. The investment bank forecasted that cyclical sectors and smaller-cap companies would drive market gains in 2024.

In the bond market, longer-dated U.S. Treasury yields increased in response to comments from key figures, including Federal Reserve Chair Jerome Powell and Chicago Fed President Austan Goolsbee.

Powell's recent statement signaling a potential end to the tightening of monetary policy, along with expectations for rate cuts, influenced market dynamics. However, some Federal Reserve officials, including Goolsbee and Cleveland Fed President Loretta Mester, cautioned against premature expectations of rate cuts, emphasizing the need to assess the sustainability of inflation.

Goldman Sachs anticipates multiple rate cuts in 2024, with a 25 basis points reduction at each of the March, April, and May meetings, followed by quarterly cuts. The bank predicts benchmark rates to reach a range between 4% and 4.25% by year-end. This outlook contrasts with BofA Global Research, which foresees a 100 basis points cut by the Fed in 2024, beginning with a 25 basis points reduction in March.

Oil prices climbed due to increased attacks by Houthi militants in the Red Sea, leading to concerns about supply disruptions. As a result, energy stocks experienced a nearly 1% rise. The decision by Russia to deepen oil export cuts further contributed to the uptick in oil prices.

Looking ahead, investors are awaiting key economic data releases, including the Commerce Department's third and final take on third-quarter GDP and the Personal Consumption Expenditures (PCE) report, which will provide insights into income growth, consumer spending, and inflation. Hence, the U.S. stock market might undergo fluctuations within the upper range from the year's end to the beginning of the next year, with the possibility of a downward correction occurring thereafter.

Data for Technical Analysis (5H) CFD US 500 [S&P 500]

Resistance : 4746.5, 4749.6, 4754.8

Support : 4736.1, 4733.0, 4727.8                      

5H Outlook

Source: Investing.com                  

Buy/Long 1 If the support at the price range 4726.1 - 4736.1 is touched, but the support at 4736.1 cannot be broken, the TP may be set around 4746.5 and the SL around 4721.1, or up to the risk appetite.

Buy/Long 2 If the resistance can be broken at the price range of 4746.5 - 4756.5, TP may be set around 4760.0 and SL around 4731.0, or up to the risk appetite.       

Sell/Short 1 If the resistance at the price range 4746.5 - 4756.5 is touched, but the resistance at 4746.5 cannot be broken, the TP may be set around 4733.0 and the SL around 4761.5, or up to the risk appetite.

Sell/Short 2 If the support can be broken at the price range of 4726.1 - 4736.1, TP may be set around 4719.0 and SL around 4752.0, or up to the risk appetite.       

Pivot Points Dec 19, 2023 01:36AM GMT