Dec 27, 2023

The markets are set to reopen positively after the Christmas trading close.


SP500 – Daily Chart

The SP500 is trading very close to the all-time high at 4,820, which will be the January target.

March futures for the US S&P 500 were up 0.14%, and March Nasdaq 100 E-Mini futures were 0.18% on Tuesday as trading resumed following the Christmas holiday. Investors are pricing in earlier and deeper interest rate cuts from the Federal Reserve next year following a softer US inflation report last week.

In Friday’s trading session, Wall Street’s indices ended mixed, with Karuna Therapeutics up 47% after Bristol Myers Squib agreed to buy the drugmaker for $14 billion in cash. However, Nike plunged around 11% after the sportswear giant reported mixed Q2 results and cautious revenue guidance for the second half.

Key data from the US Department of Commerce showed that the US core PCE price index, a key inflation gauge for the Federal Reserve, was 0.1% over the month and 3.2% year-over-year in November. That was softer than expectations of 0.2% monthly and 3.3% on a yearly basis. November personal spending was also higher by 0.2% over the month, while the Michigan consumer sentiment reading was revised to a 5-month high of 69.7 in December, beating expectations of 69.4.

“The data was very dovish, and, of course, this is the Fed’s primary measure of inflation. But the core being below expectations and the top line also being below expectations is positive for the market, indicative that inflation is declining,” said Tim Griskey, senior portfolio strategist at Ingalls & Snyder.

Markets are now seeing a 14% chance of a 25 basis point rate cut at the next central bank meeting in January but a 75% chance of a rate cut at the March FOMC meeting.

Asian stock markets were mixed, with China’s Shanghai Composite Index down 0.68% and Japan’s Nikkei 225 up 0.16%. Sentiment in the Chinese market is still weak despite authorities stepping back from a video game industry crackdown. Semiconductor and gaming stocks were lower last week, but an approval of 105 domestic games on Monday boosted the outlook for the sector.

Japan’s central bank governor boosted the Nikkei by saying it is not rushing to end the accommodative low-interest rate policy.

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