May 19, 2023

The S&P500 index is climbing toward the 4,200 level, which could be a breakout from the resistance that has capped stocks since September 2022.

SPX500 – Weekly Chart

SPX500 – Weekly Chart

The SPX500 found support at the downtrend line, which came from the market high in January 2022. 

Goldman Sachs has said that a recent bout of job cuts will boost the profitability of companies in the US stock market

“Artificial intelligence represents the biggest potential long-term support for profit margins. Our economists’ productivity estimates suggest AI could boost net margins by nearly 400 bp over a decade,” Goldman said. 

“Two-thirds of current jobs are exposed to some degree of AI automation, and that generative AI could substitute up to one-fourth of current work. Extrapolating our estimates globally suggests that generative AI could expose the equivalent of 300 million full-time jobs to automation” as up to “two-thirds of occupations could be partially automated by AI.” 

Stocks rose after Western Alliance reported that deposits had been increased by $2bn since the end of the previous quarter. That gave investors hope that the problems with regional banks were over. US Republican party leader Kevin McCarthy also said in an interview with CNBC that he was confident there would be no debt default by the US government. 

In economic data, housing construction in the country saw a modest uptick last month. However, the increase was from a lower level than initially estimated. The Department of Commerce reported a 2.2% month-over-month increase in housing starts for an annual rate of 1.4 million units. 

“The bigger picture here is that residential construction is now stabilising, after being a huge drag on fixed investment in 2022,” said Kieran Clancy at Pantheon. 

“That said, any rebound in residential fixed investment will be swamped by a plunge in business capital spending; we expect total real fixed investment to fall by 4% and 3% in the second and third quarters, respectively”. 

Investors will now look to Friday’s testimony from Federal Reserve Chair Jerome Powell for further hints on the central bank’s plan for further rate increases. 

Billionaire investor Paul Tudor Jones believes the Fed is finished with rate hikes. “I think they’re done. I mean, they could probably declare victory now. Because if you look at CPI, it’s been declining 12 straight months, 12 straight months, that’s never happened before in history,” he said.

Read More

Record Sales at ASML Fuels a Global Stock Rally
EURUSD Heads for Support Ahead of ECB Rate Decision
Tesla Stock Looks to Earnings for Reversal
Markets Anticipate Chinese Government Intervention After Slump
USDJPY Awaits the Latest Bank of Japan Interest Rate Decision
BoJ Focuses On Latest USD/JPY Rally