The S&P 500 broad market index futures are
up by 0.7% this week, trading at 6,075 points. The benchmark hit new all-time
highs four times, peaking at 6,094 points, and the winning streak appears
poised to continue.
Investors are closely watching the U.S. labor
market report for November, scheduled for release on Friday, which is expected
to indicate moderate cooling. While the U.S. manufacturing PMI exceeded expectations
in November, other business activity indicators fell short of Wall Street
forecasts. The ISM Services PMI dropped to 53.7 points from 57.2, and ADP
Nonfarm Payrolls for November came in at 146,000, below the consensus estimate
of 166,000. Initial jobless claims have also risen, reflecting a softening
labor market.
Despite this, the overall performance of the
American economy remains positive. However, doubts linger about its robustness,
contrary to Federal Reserve Chair Jerome Powell's recent optimistic remarks.
Powell had previously highlighted labor market risks in September, prompting
skepticism among investors. As a result, his latest statements had little
market impact.
Bets on a quarter-point interest rate cut by
the Fed in December have risen to 70.3%, up from 66.0%, though lower than
Thursday’s 78.2%. U.S. 10-year Treasury yields have also dropped, reaching lows
of 4.17%.
The upcoming Nonfarm Payrolls report is
expected to fall short of the 202,000 forecast, with estimates ranging between 160,000
and 200,000. Wall Street analysts predict a slight uptick in unemployment to
4.2%, up from 4.1%, supported by a 9,000 increase in jobless claims during
November. While this may not significantly impact employment levels, the report
could either present mixed results or lean negative.
Should the report be weaker than expected, the
stock market could react positively, with the S&P 500 possibly climbing to
new highs in the 6,150-6,200 range. However, higher targets may be difficult to
achieve. Conversely, a disappointing report could trigger a market pullback to
6,000 points, further pressure the U.S. dollar, and drive 10-year yields even
lower.
The SPDR S&P 500 ETF Trust (SPY) has yet
to update its capital flow data, which will be of particular interest ahead of
next week’s U.S. inflation report and European Central Bank meeting.
From a technical
perspective, the S&P 500’s outlook is worsening. The index surpassed
initial targets at 5700-5800 points and hit the targets at 6050-6150. The
benchmark has to hold above the resistance at 6150 points to climb further. Otherwise,
a correction could appear.
In commodities, Brent
crude prices are hovering at $71.40 per barrel. The nearest resistance is at
$78.00-80.00, with support at $69.00-71.00. The Organization of Petroleum
Exporting countries and its allies know as OPEC+ delayed production increase until
April 2025, as expected. Chances for a decline below the support towards $59.00-62.00
per barrel are rising.
Gold prices are steady
at $2,638 per troy ounce this week. The nearest resistance is at $2,750-2,770.
In case of a breakthrough, prices could continue toward $2,870-2,890, with
possible highs of $3,200-$3,300.
In the currency
market, the EURUSD has recovered to 1.05900 this week. Nonfarm Payrolls data
release will largely guide the pair further. If it survives above 1.05700 a
larger recovery to 1.09500-1.10500 by the end of January – beginning of
February will be confirmed. However, this recovery could happen much faster
considering recent oversold tension in the pair prompted by an extreme reversal
pattern.