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Within the first week of 2024, buyers appeared unsure that the inventory market would proceed the tail finish of 2023 rally. However right here we’re, three weeks later, and the S&P 500 Index ($SPX) notches new report highs 5 buying and selling periods in a row. The final time this occurred? November 2021.

It could have been good to see the S&P 500 hit a report shut to complete the buying and selling week. It got here so shut. 

Buyers are not apprehensive about something proper now. The CBOE Volatility Index ($VIX) stays comparatively low at 13.29. This week, we obtained perception into some key financial information, which indicated, general, that the US economic system is slowing. This was excellent news for the inventory market, which retains going and going.

The Fed’s most trusted inflation information level, the Private-Consumption Expenditures (PCE) elevated by 2.9%, under the three.0% estimate. However shopper spending went up 0.7% in December, increased than anticipated. Shoppers continued to buy, despite the fact that private revenue was flat. The place’s the cash coming from?

Earlier within the week, the This autumn GDP was launched, indicating the US economic system grew at a 3.3% annual charge within the fourth quarter. It is increased than economists estimated, but it surely’s additionally slower than Q3’s progress, which was 4.9%.

So, general, the information main as much as this week means that inflation has softened whereas the US economic system remains to be sturdy. Nonetheless, the expansion is decelerating. Does that imply the US will see a smooth touchdown? It is most likely too early to inform, but it surely’s one thing to hear for when Chairman Powell takes the rostrum subsequent week after the Federal Reserve choice on rates of interest.

The Fed is predicted to carry rates of interest regular of their subsequent assembly, however buyers shall be listening for any clues hinting when charge cuts will begin. In line with the CME FedWatch Instrument, there’s a few 50% likelihood of the Fed slicing charges by 25 foundation factors of their March assembly.

Equities Nonetheless Rising

The inventory market appears to be content material with how the economic system is performing. The S&P 500 ($SPX) and Dow Jones Industrial Common ($INDU) have been notching new highs this week. Expertise shares are again in favor, with many Tech and Communication Companies reporting earnings subsequent week. Intel’s disappointing steering might have dampened the keenness in Tech, however general, the sector has been rallying. The Invesco QQQ Belief (QQQ) has been rising since late October 2023 (see chart under).

CHART 1. DAILY CHART OF QQQ. QQQ has been shifting in an upward-sloping channel. A break above or under this channel will be a sign to which path the QQQ will transfer.Chart supply: StockCharts.com. For instructional functions.

Subsequent week, some key tech gamers shall be reporting earnings. Chip shares are beneath strain after Intel’s and KLA Corp’s weaker steering. Buyers shall be intently listening to AMD’s earnings subsequent week. Will AMD present steering much like Intel’s? If it does, it would ship a unfavourable sentiment rippling via the sector. Watch the upward-sloping channel within the QQQ; a break above or under the channel shall be a sign of which path the QQQ will transfer.

For this reason buyers ought to all the time have a look at the broad image when analyzing the inventory market.

One helpful indicator to observe is the Bullish % Index (BPI). It is useful to have a ChartList of the BPI for the completely different sectors and main indexes. Trying via the BPI for the 11 S&P sectors, as of now, Shopper Staples, Utilities, and Power are the one three sectors favoring the bears. However that might change.

Fed Week On the Radar

Curiously, regardless of the rise in equities, the benchmark US 10-year Treasury yield ($TNX) has stabilized at across the 4.0–4.2% vary. Is the bond market telling us one thing we might not know?

CHART 2. 10-YEAR US TREASURY YIELD STABILIZING. Watch the 10-year Treasury yields as we head into Fed week. They might be telling you one thing you will have missed.Chart supply: StockCharts.com. For instructional functions.

Subsequent week may carry some volatility, with a number of of the Magnificent Seven reporting subsequent week and the FOMC assembly. 

Finish-of-Week Wrap-Up

• S&P 500 down 0.07% at 38109.43, Dow Jones Industrial Common up 0.16% ; Nasdaq Composite down 0.36% at 15455.36
• $VIX down 1.41% at 13.26
• Greatest performing sector for the week: Power
• Worst performing sector for the week: Shopper Discretionary
• High 5 Massive Cap SCTR shares: Affirm Holdings (AFRM), Tremendous Micro Pc, Inc. (SMCI); Veritiv Holdings, LLC (VRT); Nutanix Inc. (NTNX); CrowdStrike Holdings (CRWD)

On the Radar Subsequent Week

• Earnings week continues, with Superior Micro Gadgets (AMD), Alphabet Inc. (GOOGL), Microsoft Corp. (MSFT), Apple Inc. (AAPL), Amazon.com Inc. (AMZN), and Meta Platforms, Inc. (META) reporting. 
• Federal Reserve Curiosity Charge choice
• Jan Non-Farm Payrolls (NFP)
• November S&P/Case-Shiller Dwelling Costs
• Fed Curiosity Charge Choice

Disclaimer: This weblog is for instructional functions solely and shouldn’t be construed as monetary recommendation. The concepts and techniques ought to by no means be used with out first assessing your personal private and monetary state of affairs, or with out consulting a monetary skilled.