Record Highs and AI-Driven Rally Mark Monday, Earnings Season in Focus

Building on the momentum from Wall Street's recent record-breaking performance, Monday witnessed an uptick in the MSCI global equities index. The S&P 500 and Dow both reached record highs on the same day, with the Dow surpassing 38,000 for the first time. U.S. stock futures pointed towards a positive start, sustaining the rally driven by artificial intelligence (AI) that had propelled the S&P 500 to its initial record high close in two years.

The previous session witnessed gains in the Industrials, Telecoms, and Financials sectors, driving U.S. stocks higher. Wall Street's major averages, including the S&P 500 and Dow, closed more than 1% higher on Friday. This surge was fueled by an upgraded second-quarter profit forecast from server maker Super Micro Computer, leading to substantial gains in AI chipmakers like Nvidia and Advanced Micro Devices, as well as a surge in the Philadelphia SE Semiconductor Index to an all-time high.

The optimism surrounding AI was further boosted by TSMC, the top contract chipmaker, forecasting a 20% increase in revenue for the year, attributing it to the rising demand for AI applications.

As earnings season intensifies, key central banks hold their initial meetings of 2024, and PMI data is anticipated to reveal the global economic status. Approximately 62% of S&P 500 companies reporting Q4 2023 results have positively surprised in both earnings per share and revenue, according to FactSet. However, the overall blended YoY earnings decline for the S&P 500 stands at -1.7% for Q4 2023, marking the fourth instance of a YoY decline in the past five quarters.

Major companies like Netflix, Tesla, 3M, and Intel are scheduled to report earnings this week. The S&P 500, having achieved a record high close, may face challenges if upcoming earnings fail to justify current high valuations.

The technology sector, a driving force behind the stock rally, is awaiting results from significant players like Microsoft and Apple in the following week. Semiconductor stocks, including Nvidia, reached fresh highs, contributing to the overall tech sector's positive performance.

Meanwhile, the U.S. dollar exhibited minimal fluctuations or slight gains against various currencies, anticipating pivotal central bank policy decisions in both Japan and the euro zone that could impact the currency's trajectory for the year.

The upcoming release of economic data, including fourth-quarter GDP and key inflation readings, will likely influence the Federal Reserve's interest rate decision. While slowing inflation has prompted expectations of rate cuts, policymakers have expressed reservations. The odds of a March rate cut have shifted to 50-50 from just under 80% a week ago, influenced by positive data on retail sales and consumer sentiment. Federal Reserve officials will enter a blackout period ahead of their Jan. 30-31 policy meeting. Hence, it could influence the overall performance of the U.S. stock market, causing fluctuations in the higher range throughout this period. Increased caution might be exercised as the end of January approaches.

Data for Technical Analysis (5H) CFD US30 DJIA

Resistance : 38013.7, 38034.3, 38067.8

Support : 37946.7, 37926.1, 37892.6                     

5H Outlook

Source: Investing.com                                

Buy/Long 1 If the support at the price range 37911.7 - 37946.7 is touched, but the support at 37946.7 cannot be broken, the TP may be set around 38028.3 and the SL around 37894.0, or up to the risk appetite.

Buy/Long 2 If the resistance can be broken at the price range of 38013.7 - 38048.7, TP may be set around 38100.0 and SL around 37929.0, or up to the risk appetite.       

Sell/Short 1 If the resistance at the price range 38013.7 - 38048.7 is touched, but the resistance at 38013.7 cannot be broken, the TP may be set around 37940.7 and the SL around 38066.0, or up to the risk appetite.

Sell/Short 2 If the support can be broken at the price range of 37911.7 - 37946.7, TP may be set around 37857.0 and SL around 38031.0, or up to the risk appetite.       

Pivot Points Jan 23, 2024 02:48AM GMT