On Monday (December 11th), the US stock market, bonds, and the US dollar fluctuated slightly, with traders waiting for key economic data and the Federal Reserve meeting, which will test the market's optimism about next year's interest rate cut.
Wall Street is about to use Tuesday's Consumer Price Index to determine whether the trend of deflation is continuing. The results of the Federal Reserve's final decision-making meeting for 2023 will be released on Wednesday, and it is widely expected that officials will maintain interest rates unchanged and announce an economic forecast summary.
Oanda analyst Craig Erlam said, "The start of this week was lackluster, but there will be a lot of things happening in the next few days that may determine how the market will end this year and start 2024. Wednesday's Federal Reserve decision is unlikely to be controversial, but the accompanying forecasts, charts, and press conferences are likely to be controversial."
The S&P 500 index remained above 4600 points, while the Nasdaq 100 index outperformed the market due to a rebound from chip manufacturers. After the US stock market closed, Oracle reported disappointing sales due to a slowdown in cloud computing momentum. The yield of 10-year US treasury bond bonds and the US dollar did not change much.
However, gold prices have continued to weaken to nearly three-week lows, suppressed by rising US dollar and US Treasury yields. Spot gold closed at $1981.30 per ounce, down 1.1%, reaching its lowest level since November 20th. The US deposit closed down about 1% and settled at $1993.70.
A survey conducted by 22V Research showed that 46% of surveyed investors believe that the market's response to CPI is mixed or negligible, 28% of investors tend to be more conservative and cautious, reducing their holdings of risky assets, and only 26% of investors are more willing to take risks, driving the rise of risky assets.
UBS Private Wealth Management analyst Greg Marcus said that the recent strength of the stock market is mainly based on expectations of a soft landing and a decrease in interest rates in 2024. The Federal Reserve may cut interest rates next year, but this may be because the economy is slowing down, and in this situation, the market may look different from now.
"Although inflation data shows signs of easing, the elasticity of the labor market makes it difficult for the Federal Reserve to cut interest rates amidst economic weakness. We believe investors are overly optimistic about this view," said Megan Horneman, an analyst at Verdence Capital Advisors
A survey by the New York Federal Reserve shows that recent inflation expectations for American consumers fell to their lowest level since April 2021 in November.
More and more people speculate that the Federal Reserve will raise interest rates and begin to implement easing policies before the middle of 2024, which led to a sharp fall in the yield of US treasury bond bonds in November and rekindled investors' risk appetite.
Forex.com and City Index analyst Matthew Weller said that some investors expect some volatility in CPI data, but as the Federal Reserve appears to be committed to maintaining higher interest rates for a longer period of time, we may not see as large volatility reports as in the past. "Ultimately, regardless of what the US inflation report shows this week, Jerome Powell and his colleagues hope to see at least a few more months of employment and inflation data before adjusting the current monetary policy setting."
Goldman Sachs asset management analyst Alexandra Wilson Elizondo said that as the market adapts to the possibility of the Federal Reserve maintaining higher interest rates for a longer period of time, any pullback under this premise will be seen as an illusion, with prices moving in one direction first and then rapidly reversing. "If the market falls, it's a good opportunity to rebalance or buy on dips. It's too early to underestimate the risk premium of stocks now."
According to Bloomberg's latest Markets Live Pulse survey, as the United States avoids a recession, the S&P 500 index is set to hit a historic high in 2022, although consumer weakness means the index's increase will be lower than the 20% increase this year.
The median of 518 respondents predicted that the S&P 500 index would climb to 4808 next year, surpassing the 4797 closing peak set in January 2022, while the yield of 10-year US treasury bond bonds would fall to 3.8% from the high of 5% this year. More than two-thirds of the respondents stated that they do not believe a hard landing in the economy is the biggest risk facing the market, and most expect the Federal Reserve to start cutting interest rates before July.
John Stoltzfus, Chief Strategist at Oppenheimer Asset Management, said, "We expect 2024 to be a transitional year as we expect the Federal Reserve to shift from a restrictive monetary policy to an accommodative stance."
Citigroup analyst Scott Chronert said that with the support of "sustained" industry level profit growth and expanding gains outside of large technology stocks, the S&P 500 index may hit a historic high next year, and he expects the index to end at around 5100 points in 2024.
Goldman Sachs analyst David Kostin said that as economic growth remains moderate and interest rates do not rise further, growth stocks in the United States will perform better than value stocks next year.
Morgan Stanley analyst Michael Wilson said that US company profits may weaken in the fourth quarter and then rebound in 2024. The strategist emphasized a "significant reduction" in the general expectation for the fourth quarter and added that he is not as optimistic about the extent of profit margin expansion next year as other strategists.
Tuesday trading day focus and wind vane:
① 15:00 UK November unemployment claims and unemployment rate
② 18:00 Germany December ZEW Economic Prosperity Index
③ 18:00 Eurozone December ZEW Economic Prosperity Index
④ 19:00 US November NFIB Small Business Confidence Index
⑤ 21:30 US November Unseasonally Adjusted CPI Annual Rate, US November Quarterly Adjusted CPI Monthly Rate, US November Unseasonally Adjusted Core CPI Annual Rate, US November Core CPI Monthly Rate
⑥ EIA releases monthly short-term energy outlook report at 01:00 the next day
⑦ API crude oil inventory for the week from 05:30 the next day to December 8th in the United States
Analysis of major currency trends:
EUR: EUR/USD up, closing at 1.0764, up 0.05%. Technically, the initial resistance to the upward trend of the exchange rate is at 1.0779, the further resistance is at 1.0797, and the key resistance is at 1.0817; The initial support for the downward exchange rate is at 1.0741, further support is at 1.0722, and more critical support is at 1.0703.
GBP: GBP/USD up, closing at 1.2554, down 0.06%. Technically, the initial resistance to the upward trend of the exchange rate is at 1.2588, the further resistance is at 1.2623, and the key resistance is at 1.2658; The initial support for the downward exchange rate is at 1.2519, further support is at 1.2485, and more critical support is at 1.2450.
JPY: USD/JPY up, closing at 146.176, down 0.82%. Technically, the initial resistance to the upward trend of the exchange rate is at 146.839, the further resistance is at 147.604, and the key resistance is at 148.621; The initial support for the downward exchange rate is at 145.057, further support is at 144.04, and more crucial support is at 143.275.
