S&P 500 futures declined by 0.8% to 5780
points this week, raising alarms as the benchmark broke below the key support
at 5800-5830 points, suggesting a potential continuation to 5700-5730 points in
the coming days. This downward trend follows the release of strong December
Nonfarm Payrolls data last Friday, which showed the U.S. economy added 256,000
jobs, far exceeding the 164,000 consensus. Unemployment fell to 4.1% versus the
expected 4.2%. December marked the second consecutive month of robust labor
market performance, casting doubt on further Federal Reserve (Fed) rate cuts in
January or throughout 2025.
In response, 10-year Treasury yields surged to
4.79%, a 15-month high, while the probability of a quarter-point rate cut in
January fell to 2.7%, with March odds dropping to 21.6% from 40.1% last
Thursday. The strength of the U.S. economy, combined with recent sanctions on
Russian energy companies and shipping, has complicated monetary policy
expectations. Brent crude prices spiked 7.0% to $81.85 per barrel, surpassing
the $78.00-80.00 resistance level. Sustained price increases could drive
inflation higher in January, forcing the Fed to adopt a more hawkish stance.
Bank of America has revised its 2025 forecast, ruling out rate cuts and warning
of potential hikes if oil prices continue rising.
This uncertain environment has pressured
equities, with the S&P 500 potentially falling to 5650-5670 or even
5250-5350 points if pessimistic scenarios play out. SPDR S&P 500 ETF Trust
(SPY) reported $2.2 billion in net outflows last week, reflecting bearish
sentiment. Upcoming U.S. inflation data on Tuesday and Wednesday is expected to
show accelerating inflation, further weighing on markets. However, optimism
around Q4 2024 corporate earnings, particularly in the banking sector, could
provide some relief and spark a rebound.
From a technical perspective, the S&P 500
remains in a downside formation after failing to hold its previous targets of
5700-5800 points and retreating from the 6050-6150 range. The benchmark now
targets 5650-5750 points, with a key resistance zone at 5800-5830 points and
potential downside support at 5700-5730 points.
In commodities, Brent crude is trading above
$81.00 per barrel, driven by U.S. sanctions targeting Russia's oil sector.
While further price gains seem limited, a brief surge to $88.00-90.00 is
possible. If prices stabilize above $80.00, an upside scenario becomes the
baseline, with support holding firm at $69.00-71.00.
Gold prices are steady at $2,678 per troy
ounce this week, with resistance at $2,670-2,690 and support at $2,570-2,590.
Despite headwinds, gold maintains a bullish outlook, supported by technical
patterns and macroeconomic factors. A breakout above resistance could drive
prices to $2,770-2,780, potentially reaching new all-time highs in the second
half of January.
In the currency market, the U.S. Dollar
strengthened further after the labor market report, pushing EURUSD to 1.01770,
nearing parity with the Dollar. This has prompted China's central bank to
support the Yuan, signaling potential future Dollar weakening. A breakout above
1.0570 in EURUSD would be required to shift to an upside scenario, targeting
1.0950-1.1050.