S&P 500 broad market index futures are
rising by 2.2% to 5,947 points, which may seem miraculous after their decline
to 5,700 points on Monday. The benchmark is now regaining an upward trajectory,
aiming to rewrite its all-time highs. To maintain this momentum, the stock
market requires the newly inaugurated U.S. president, Donald Trump, to exhibit
restraint in his first days in office.
Trump sought to support the stock market even
before his inauguration by spreading speculation that the new U.S.
administration would introduce a gradual increase in tariffs rather than an
abrupt hike. This news reversed the S&P 500 index’s trajectory upwards on Monday.
Macroeconomic data also contributed positively, as producer prices in the U.S.
rose to 3.3% year-on-year compared to the consensus estimate of 3.5%. Moreover,
core PPI, which excludes energy and food prices, remained flat at 3.5%
year-on-year, defying expectations of an increase to 3.8%. On the following
day, consumer inflation delivered another positive surprise as core CPI
unexpectedly declined to 3.2% year-on-year, below the anticipated 3.3%.
This favourable environment caused a reversal
in 10-year U.S. Treasury yields, which had previously surged to a 15-month high
of 4.79%, bringing them down to 4.58%. Consequently, the stock market climbed,
with the S&P 500 index gaining 1.7% to reach 5,951 points on Wednesday. The
benchmark has now shifted its pattern to an upward trajectory, targeting the
6,050-6,150 range. However, the index has nearly reached its upside potential,
encountering strong resistance at 5,950-5,970 points. It is anticipated that
this level will coincide with Trump’s formal return to the White House.
The benchmark’s future movement remains
uncertain. From a technical standpoint, a positive start to the Q4 2024
corporate reporting season could propel the index further upwards. Next week’s
lack of major macroeconomic data clears the way for Trump’s inauguration to
dominate market sentiment. The event’s significance looms large, influencing
expectations across the board. Even positive GDP data from China has been
largely ignored in the lead-up to potential tariff increases. Other developments
are also likely to be interpreted through the lens of the inauguration.
Large investors appear to be exercising
caution. The SPDR S&P 500 ETF Trust (SPY) reported revised net outflows of
$6.9 billion last week and net inflows of $114 million this week, reflecting
significant prudence ahead of 20 January.
From a technical perspective, the S&P 500
index has shifted to an upward formation. It is currently targeting the
6,050-6,150 range, though it faces strong resistance at 5,950-5,970 points.
Breaking through this level could propel the benchmark towards its main
targets, while the nearest support is located at 5,850-5,870 points.
In commodities, Brent crude is trading above
$81.00 per barrel, bolstered by U.S. sanctions targeting Russia's oil sector.
While further price gains may be limited, a brief surge to $88.00-90.00 per
barrel remains possible. Prices appear to be stabilising above $80.00, making
an upside scenario more probable, with firm support at $69.00-71.00 per barrel.
Gold prices have risen to $2,706 per troy
ounce this week, surpassing resistance at $2,670-2,690. A retest is likely,
with prices expected to continue upwards towards $2,770-2,780 per ounce,
potentially reaching new all-time highs in the latter half of January.
In the currency market, the U.S. dollar has
entered a correction phase, influenced by a combination of lower inflation and
the prospect of revised tariff policies. The EUR/USD pair has reached
resistance at 1.02800-1.03000. A breakout above this level could pave the way
for further gains, with targets at 1.04700-1.05700 and a potential upside
scenario aiming for 1.09500-1.10500.