S&P 500 futures are down 0.09% this week
to 6,099 points, recovering most of the 3.0% decline from Monday when the index
briefly hit 5,914 points. Markets faced turbulence due to Donald Trump’s tariff
threats against Colombia and the DeepSeek R1 chatbot controversy. The chatbot
reportedly achieved similar effectiveness to existing AI models at a 90% lower
cost, raising concerns about the valuations of AI industry leaders like Nvidia.
This led to a sharp sell-off in tech stocks, with the Nasdaq 100 dropping 5.2%
on Monday. However, later findings suggested that DeepSeek had used elements of
existing ChatGPT models, drawing comparisons to the space race between the USSR
and the U.S. in the 1950s and 1960s. Investors are now reassessing the
situation, shifting focus to the potential benefits of cheaper generative AI
models. This sentiment has supported market leaders like OpenAI. Markets also
shrugged off weak Tesla (TSLA) Q4 earnings and hawkish comments from the
Federal Reserve (Fed) on Wednesday.
U.S. Q4 GDP slowed to 2.3%
quarter-over-quarter from 3.1%, tempering expectations of aggressive Fed action.
Trump criticised the Fed following its meeting, calling for further interest
rate cuts. Meanwhile, he reaffirmed plans to impose tariffs on imports from
Canada and Mexico starting February 1, a development that is weighing on market
sentiment. Investors are hopeful that a resolution will emerge before the
weekend. On Friday, the December Personal Consumption Expenditures (PCE) Index
will be released, with expectations for a rise to 2.6% year-over-year from
2.4%. The market reaction remains uncertain, even if the data comes in below
expectations. Investor positioning is improving, as indicated by inflows into
the SPDR S&P 500 ETF Trust (SPY), which reported $1.1 billion in net
inflows this week, partially offsetting prior outflows of $5.2 billion.
The S&P 500's technical outlook is
weakening. The index has reached its key resistance zone of 6,050–6,150 but
remains vulnerable within an upward formation. The immediate resistance stands
at 6,100–6,120, while support is seen at 6,000–6,020.
Oil prices continue to decline, falling to
$75.70 per barrel with a downside target of $69.00–71.00. The upcoming OPEC+
meeting on Monday is unlikely to provide support, as members are expected to
discuss production increases. However, Trump’s proposed tariffs on Canadian and
Mexican imports could briefly push oil prices higher.
Gold prices have reached a new all-time high
of $2,800 per ounce. A period of consolidation is expected before a potential
move higher, with the next resistance level at $2,860.
The U.S. Dollar’s correction has stalled, with
the EUR/USD down 1.1% to 1.0377. Despite the recent dip, the pair remains
positioned for further gains toward 1.0950–1.1050 if bullish momentum persists.