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The market remains optimistic about U.S. PCE, the S&P 500 may hit the 8-line line for the week, and U.S. bond yields remain weak
2023-12-22
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On Thursday (December 21), as the market expected that the Federal Reserve's preferred inflation indicator (PCE) would be closer to its long-term target tomorrow and that the U.S. third-quarter GDP growth rate was revised downward, the U.S. stock market rebounded and closed higher.
The S&P 500 rose 1.0%, and if it can hold on to its gains, it will mark its eighth consecutive week of gains, its longest streak in more than five years. The Nasdaq 100 faces similar challenges, with the tech-heavy benchmark up 1.2% after a sell-off on Wednesday knocked it off its all-time high.
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Nike Inc. warned that revenue would be weak in the second half of its fiscal year, sending its shares down about 5% in after-hours trading. Peers including Foot Locker also were lower in after-hours trading.
Wall Street's VIX index briefly rose above 14 for the first time since November, after the measure of stock volatility had been near multi-year lows.
The Fed's preferred inflation gauge, the so-called core personal consumption expenditures price index, will be released on Friday before U.S. stocks open. Whether the data supports the Fed chair's recent pivot will depend on the details of the data, according to Bloomberg Economics.
Some market watchers blamed Wednesday's plunge on so-called zero-day options (ODTEs), noting that heavy "bearish" volume could intensify the sell-off as some option sellers balance their books. But many believe the broader outlook for slower inflation and rate-cut bets means the sell-off will be short-lived.
Citigroup strategists recommend buying the pullback, adding that investors should "expect volatility ahead, but an eventual U.S. Fed pivot will be the main driver."
The global bond rally paused on Thursday, with U.S. two-year Treasury yields hovering around 4.35%. The U.S. 10-year Treasury bond rate (linked to everything from mortgage rates to loan rates) rose slightly to 3.89%, but hit a nearly five-month low at 3.883% during the session and is still down about 50 basis points this month.
BMO Capital Markets analyst Ian Lyngen wrote: "For the market approaching the end of the year, the market is gradually calming down, and various factors and trends are converging to form a relatively stable state. The price trend next week is in this case "Downward will be largely irrelevant as markets anticipate limited liquidity and investor confidence is even more limited."
The annualized growth rate of U.S. gross domestic product in the third quarter was lowered to 4.9%, lagging economists' forecasts. The number of people applying for unemployment insurance for the first time in the United States increased less than expected last week and was close to a record low.
Chris Larkin, managing director of trading and investing at Morgan Stanley E*Trade, said the numbers "remain consistent with the narrative that a cooling economy will allow the Fed to continue cutting interest rates in the near future. Right or wrong, this sentiment has been a factor in the market's recent performance." played a significant role in the surge, even as the Fed has been doing its best to temper expectations."
After the data was released, swaps traders were betting that the Fed would cut rates by at least six 25 basis points by the end of next year, well ahead of what three policymakers said last week.
In commodities, oil prices retreated after three consecutive days of gains as a surge in U.S. output eased the threat of Houthi attacks on one of the world's most important shipping routes and Angola announced on Thursday that it would withdraw from the Organization of the Petroleum Exporting Countries (OPEC). ), which is a blow to the group of oil-producing countries led by Saudi Arabia. .
The euro maintained its upward momentum, rising above 1.1000 in late trading, and will now challenge the November high of 1.1017 again. Commodity currencies were once again the winners as both the Australian and Canadian dollars remained strong on optimism about the global economy in 2024. Both are set to close at their best levels of the day, with the Australian dollar particularly strong. It rose above 0.6800 for the first time since July and there is not much to hinder the development of a June/July double top pattern.
Highlights and trends for Friday’s trading day:
①15:00 UK third quarter GDP annual rate final value, UK November seasonally adjusted retail sales monthly rate, UK third quarter current account
②21:30 Canadian October GDP monthly rate, US November core PCE price index annual rate, US November personal expenditure monthly rate, US November core PCE price index monthly rate
③23:00 The final value of the University of Michigan Consumer Confidence Index in December in the United States, the one-year inflation rate expectation in the United States in December, and the annualized total number of new home sales in the United States in November
④The next day at 02:00, the total number of oil drilling rigs in the United States for the week to December 22
Analysis of major currency trends:
Euro: EUR/USD rose, closing at 1.1010, an increase of 0.65%. Technically, the initial resistance for the upward movement of the exchange rate is at 1.1036, the further resistance is at 1.1063, and the key resistance is at 1.1114; the initial support for the downward movement of the exchange rate is at 1.0958, the further support is at 1.0907, and the more critical support is at 1.0880.
GBP: GBP/USD rose, closing at 1.2689, an increase of 0.41%. Technically, the initial resistance for the upward movement of the exchange rate is at 1.2716, the further resistance is at 1.2748, and the key resistance is at 1.2800; the initial support for the downward movement of the exchange rate is at 1.2632, the further support is at 1.258, and the more critical support is at 1.2548.
Japanese Yen: USD/JPY fell, closing at 142.108, a decrease of 1.01%. Technically, the initial resistance for the upward movement of the exchange rate is at 143.101, the further resistance is at 144.099, and the key resistance is at 144.63; the initial support for the downward movement of the exchange rate is at 141.572, the further support is at 141.041, and the more critical support is at 140.043.
The above information is provided by special analysts and is for reference only. CM Trade does not guarantee the accuracy, timeliness and completeness of the information content, so you should not place too much reliance on the information provided. CM Trade is not a company that provides financial advice, and only provides services of the nature of execution of orders. Readers are advised to seek relevant investment advice on their own. Please see our full disclaimer.
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