U.S. Markets Steady Amid Dollar Uptick and Earnings Optimism

Global stock indexes showed little movement on Monday, with the U.S. dollar experiencing a slight increase ahead of the anticipated U.S. consumer price index (CPI) report on Tuesday. This report is expected to offer insights into when the Federal Reserve might initiate interest rate cuts. U.S. stock futures remained steady, exercising caution in anticipation of significant economic data and corporate results throughout the week.

U.S. stocks closed with gains in the Utilities, Oil & Gas, and Basic Materials sectors, while losses were observed in the Technology, Consumer Services, and Healthcare sectors.

The previous week saw the S&P 500 achieving a historic close above 5000, with gains driven by megacap companies such as Microsoft, Amazon.com, and Nvidia, the latter reaching a record high after news of a new division focused on providing customized chips for cloud computing.

Earnings season has been generally positive, with 67% of S&P 500 companies reporting Q4 2023 results, surpassing expectations for both earnings per share (EPS) and revenue. However, caution is evident in the outlook for Q1 2024, as 52 S&P 500 companies issued negative EPS guidance. The forward 12-month P/E ratio for the S&P 500 is currently elevated compared to historical averages.

Despite initial forecasts of 4–5% earnings growth for Q4 2023, the current growth rate is expected to exceed 7%, with some large-cap growth companies posting exceptional earnings. Guidance from companies in this quarter indicates promising signs, contributing to an optimistic market outlook supported by economic growth, moderate inflation, expected Federal Reserve rate reductions, and demand for AI infrastructure.

Investors eagerly await this week's economic data releases, including the Consumer Price Index (CPI), Producer Price Index (PPI), industrial production, retail sales, and the preliminary University of Michigan consumer sentiment. The CPI, a major gauge of inflation, is expected to show a slowdown in price growth. Concerns about a potential rebound in inflation have led to a cautious stance by the Federal Reserve, with officials emphasizing the need for signs of price moderation before considering rate cuts.

Earnings season continues, with over 60 firms in the S&P 500 set to unveil results, including Coca-Cola, Shopify, Kraft Heinz, Cisco Systems, and Coinbase. Expectations of a Fed rate cut in March have diminished, with markets pricing in an 84.5% chance of unchanged rates. Hence, the general trajectory of the U.S. stock market could be influenced, despite its current positive momentum resulting from favorable earnings reports. However, there remains a potential downside risk due to the uncertainty surrounding economic data in this period.

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

Resistance : 5023.0, 5026.0, 5030.8

Support : 5013.4, 5010.4, 5005.6                            

5H Outlook

Source: Investing.com                      

Buy/Long 1 If the support at the price range 5003.4 - 5013.4 is touched, but the support at 5013.4 cannot be broken, the TP may be set around 5023.0 and the SL around 4998.0, or up to the risk appetite.

Buy/Long 2 If the resistance can be broken at the price range of 5023.0 - 5033.0, TP may be set around 5035.5 and SL around 5008.0, or up to the risk appetite.       

Sell/Short 1 If the resistance at the price range 5023.0 - 5033.0 is touched, but the resistance at 5023.0 cannot be broken, the TP may be set around 5010.3 and the SL around 5038.0, or up to the risk appetite.

Sell/Short 2 If the support can be broken at the price range of 5003.4 - 5013.4, TP may be set around 4996.0 and SL around 5028.0, or up to the risk appetite.       

Pivot Points Feb 13, 2024 02:51AM GMT