US Stocks Navigate Mixed Signals Amidst Economic Uncertainty and Bank Earnings Spotlight

U.S. stocks experienced a mixed performance at the close on Monday, with gains in the Telecoms, Oil & Gas, and Utilities sectors offset by losses in Consumer Goods, Consumer Services, and Healthcare. The prior week saw minimal movement, with the S&P 500 edging up by 0.1%, the Nasdaq Composite largely unchanged, and the Dow Jones Industrial Average dipping by 0.3%.

Investors were navigating through varying bank earnings and assessing data indicating a surprise dip in U.S. producer prices in December. The decline was attributed to lower costs for items like diesel fuel and food, marking a third consecutive monthly fall. Speculation persisted that the Federal Reserve might cut interest rates from the current 5.50% to 5.25%, potentially as early as March, although some analysts suggested a more realistic timeline of May or June.

This week, attention is turning to retail sales and University of Michigan inflation expectations for additional insights into the U.S. inflation landscape. Goldman Sachs and Morgan Stanley were slated to report quarterly results, drawing interest from investors curious about the performance of institutions with a focus on investment banking and asset management, particularly in a period marked by subdued mergers and acquisitions activity.

Large U.S. banks had recently reported boosted trading profits in the fourth quarter due to optimism surrounding potential interest rate cuts by the Federal Reserve. Elevated interest rates over the preceding months had supported net interest income, but questions arose about the sustainability of this support. Banks, including JPMorgan, Bank of America, Wells Fargo, and Citigroup, set aside increased provisions for potential loan defaults, indicating a rise in defaults to pre-pandemic levels.

Despite challenges, the banks offered an overall positive assessment of the U.S. economy, highlighting the resilience of consumer spending amid pressure from higher borrowing costs. Uncertainty loomed over the global economic outlook, as a survey ahead of the World Economic Forum revealed subdued growth prospects in 2024. A majority of economists foresaw a weakening economic environment, while a notable percentage anticipated either a stronger economy or unchanged conditions. The survey emphasized ongoing tests to the world economy's resilience and indicated stalling activity in manufacturing and services sectors.

In the upcoming week, retail sales data and bank earnings were expected to take center stage. The health of U.S. consumers, a key driver of economic growth, would be closely scrutinized. Retail sales were projected to have increased by 0.4% in December. Housing market data, including housing starts and existing home sales, were anticipated to reflect ongoing challenges amid higher borrowing costs.

Amidst these economic considerations, global leaders convened in Davos for the World Economic Forum, addressing a spectrum of issues, including economic trends, geopolitical concerns, generative artificial intelligence, and environmental developments. Fed officials, including Governor Christopher Waller, Atlanta Fed President Raphael Bostic, and San Francisco Fed head Mary Daly, were also scheduled to share their perspectives. Hence, it could influence the overall volatility of the US stock market amid uncertain economic data from various major global economies. However, adjustments may be possible within a broad framework.

Data for Technical Analysis (1H) CFD US 500 [S&P 500]

Resistance : 4770.9, 4772.7, 4775.6

Support : 4765.1, 4763.3, 4760.4                                   

1H Outlook  

Source: Investing.com     

Buy/Long 1 If the support at the price range 4760.1 - 4765.1 is touched, but the support at 4765.1 cannot be broken, the TP may be set around 4772.4 and the SL around 4758.0, or up to the risk appetite.

Buy/Long 2 If the resistance can be broken at the price range of 4770.9 - 4775.9, TP may be set around 4780.0 and SL around 4763.0, or up to the risk appetite.       

Sell/Short 1 If the resistance at the price range 4770.9 - 4775.9 is touched, but the resistance at 4770.9 cannot be broken, the TP may be set around 4764.8 and the SL around 4778.0, or up to the risk appetite.

Sell/Short 2 If the support can be broken at the price range of 4760.1 - 4765.1, TP may be set around 4757.0 and SL around 4773.0, or up to the risk appetite.       

Pivot Points Jan 16, 2024 02:21AM GMT