The S&P 500 broad market index is down
0.4% to 6063 points, marking a week without any new record highs as the
benchmark remains below its peak of 6099 points. It appears unlikely that the
index will climb higher before the Federal Reserve (Fed) meeting next week.
Investors have been closely monitoring U.S. inflation data, which offered
limited guidance for market direction. While consumer prices rose as expected
to 2.7% YoY from 2.6%, producer prices unexpectedly jumped to 3.0% YoY,
surpassing the neutral forecast of 2.6%. This unexpected increase, attributed
to a sharp rise in egg prices, unsettled the market, leading to a 0.5% drop in
the S&P 500 on Thursday. Concurrently, U.S. 10-year Treasury yields surged
to 4.3%, and the dollar strengthened. Despite the unsettling producer price
data, bets on a quarter-point rate cut in December held steady at 96.4%, up
from 85.1% earlier in the week.
Labor market uncertainty, highlighted by a
rise in initial jobless claims, further contributed to the cautious market
sentiment. Investors appear to be in a waiting mode, avoiding additional risks
ahead of the Fed meeting. Speculation is mounting over Fed Chair Jerome
Powell's post-meeting comments, as his recent shifts from politically motivated
half-point cuts in September to a hawkish stance in October and November have
amplified market volatility. Powell’s rhetoric will likely be pivotal in
determining whether the S&P 500 resumes its rally or enters a correction
phase.
Large investors seem to favor another rally
wave, as data from the SPDR S&P 500 ETF Trust (SPY) shows net inflows of
$6.2 billion last week and $8.7 billion in the first days of this week. With
this support, a test of extreme targets at 6050-6150 points could occur soon.
From a technical
perspective, the S&P 500’s outlook is unchanged. 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. A pullback could emerge in the last ten
days of December.
In commodities, Brent
crude prices are hovering at $73.70 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 have risen since then. But a chaos surrounding Syria
political regime overhaul created threats to oil supplies from the Middle East.
This supports prices.
Gold prices are steady
at $2,660 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 is trying to recover, but the Dollar refuses to surrender.
The pair declined by 0.9% to 1.04650, to the limit that should not be breached in
order to keep the upside formation intact. Otherwise, the EURUSD could update
the low at 1.03310. A climb above 1.05700 is needed to open a path for a larger
recovery to 1.09500-1.10500.