Key Highlights
· Monthly and Annual Performance: Over the past four weeks, the S&P 500 has gained 3.50%, and it has surged 20% over the last 12 months, demonstrating the resilience and positive sentiment in the U.S. stock market.
· S&P 500 Performance: The S&P 500 index fell by 1.2% after the Federal Reserve meeting on Wednesday, but bounced back after investors chose to focus on the positive earnings reports.
· Tech Giants Drive Market Surge: Meta and Amazon added $280 billion in market value, with Meta tripling profits and Amazon becoming profitable again, underscoring their major impact on market trends.
Economic Drivers
Record Highs for S&P 500: Achieving new record highs and heading for its 13th weekly gain in the last 14 weeks, the S&P 500 is demonstrating robust investor confidence.
Drivers of Market Optimism: The recent positive momentum in the markets has been driven by robust corporate earnings, positive U.S. economic growth data, and the anticipation of lower interest rates, fostering an overall optimistic market outlook.
S&P 500 Decline Following Fed Statement: The S&P 500 fell by 1.6% as markets reacted negatively to the Federal Reserve's recent policy update and remarks from Chair Jerome Powell.
Investors Overlook Fed's Rate Cut Stance: Despite Federal Reserve Chair Jerome Powell indicating that a March rate cut is unlikely, investors chose to focus on the positive earnings reports, contributing to the rise in stock futures.
Economic Data Influences Market Sentiment: Recent economic data showed a mixed picture, with initial jobless claims rising for the second consecutive week to reach a two-month high. Conversely, labour costs slowed, and job cuts soared, adding complexity to market forecasts.
Tech Giants' Market Impact: Meta and Amazon added a staggering $280 billion in market value after reporting impressive financial results. Meta's profits tripled year-over-year, with revenues exceeding $40 billion, while Amazon returned to profitability, boasting over $30 billion in annual profit.
Concentration and Market Health Concerns: The concentration of gains in a few large-cap stocks raises concerns about the broader market's health and the sustainability of its growth trajectory.
Technical Overview and Key Levels
Strong Start to the Year for US500: The US500, or S&P 500, has demonstrated robust bullish momentum since the beginning of the year, recording a 3.50% overall increase and a 1.18% rise in the past week.
Bullish Trend Triggered by Fed's Rate Decision: The uptrend initiated in November after the Federal Reserve's pivot to maintain steady interest rates, has led to a significant surge of over 18% in the index over the last three months.
Current Market Condition: The US500 is currently overbought on a weekly basis but has exited overbought territory on the daily timeframe following the retracement after the recent Fed meeting. The index is maintaining a sharp uptrend channel that began in November.
Approaching the 5000 Milestone: As the index nears the 5000 mark, a psychological barrier, there's potential for profit-taking and a market top formation, but confirmation is needed as it approaches this potential resistance zone.
Key Support and Resistance Levels: The key support level is identified at 4840. A breach below this could signal a corrective phase and a shift in momentum. Short-term resistance is seen at the recent high of 4940.
Historical Trends and Future Outlook: Historically, February has been a weaker month for U.S. stocks, raising speculation about a possible correction upon reaching the 5000 level. However, the current market momentum is strongly bullish, with a focus on reaching and possibly surpassing the 5000 level.
Looking Ahead
Focus Shifts to Employment Data and More Earnings: As the week closes, investor attention shifts towards Friday's monthly jobs report, which could influence market directions. Additionally, earnings reports from major companies such as Chevron, Exxon Mobil, and AbbVie are highly anticipated.
Anticipation of U.S. Jobs Report: Market participants are keenly awaiting the U.S. Non-farm Payrolls report for January, which is projected to show an addition of 180,000 jobs. This comes in the context of the ADP National Employment Report, which recently indicated a lower-than-expected increase in private sector employment.
Monitoring U.S. Economic Health: Investors are set to closely watch the U.S. weekly jobless claims and January PMIs next week as key indicators of the U.S. economy's health.
