Wall Street: S&P 500, Nasdaq end winning streak amid key economic data and earnings report
Closing January with style, Wall Street sees the S&P 500 and Nasdaq breaking winning streaks as investors eye the Core PCE data drop and await the critical FOMC interest rate decision.
The S&P 500 and the Nasdaq snapped six-session winning streaks on Friday, with traders booking profits and moving to the sidelines ahead of a busy week of corporate earnings and economic data. With three trading sessions left in January, the tech-heavy Nasdaq has added 3.54% MTD, the S&P 500 has added 2.54%, and the Dow Jones is 1.11% higher.
The much-anticipated December Core Personal Consumption Expenditures (PCE) fell to 2.9% versus 3% expected, the lowest rate since March 2021. Core PCE on a six-month annualised basis sits at 2%, and with the disinflation trend firmly in place, Federal Reserve rate cuts are coming. The only question is when.
This week’s key economic events, the January Federal Open Market Committee (FOMC) meeting and Non-Farm Payrolls, could see the rates market pull forward or push back a first Federal Reserve rate cut currently fully priced for May.
US Q4 earnings season continues this week with reports scheduled from companies including Pfizer, Alphabet, Starbucks, AMD, Microsoft Corp (previewed here), Mastercard, Boeing, Qualcomm, Meta, Apple (previewed here), Amazon, Exxon Mobil Corp, and Chevron Corp.
What is expected from the FOMC interest rate decision
Date: Thursday, February 1st at 6 am AEDT
At its last meeting in December, the FOMC kept the Federal Funds rate unchanged at 5.25%-5.50% for a third consecutive meeting. In the accompanying statement, the Fed noted that economic growth has slowed, job gains have moderated, and inflation has eased. The all-important Fed’s “dot plots” within the Summary of Economic Projections (SEP) indicated 75 basis points of rate cuts in 2024.
While the Fed will no doubt be pleased that the disinflation trend has continued against a backdrop of moderating growth, comments from Federal Reserve Board Governor Waller in mid-January indicate that the Fed is not yet ready to signal that rate cuts are imminent.
As such, the FOMC is expected to keep the Federal Funds rate unchanged at 5.25%-5.50%. It will likely open the door to future rate cuts via a change in its forward guidance. This can be done by removing its out-of-date tightening bias that says “the extent of any additional policy firming” with a neutral statement that indicates the Fed's rate-hiking cycle is over.
Fed fund rates
S&P 500 technical analysis
After a strong rally for the S&P 500 towards the end of 2023, we started the New Year with a more cautious and neutral mindset.
We maintain the view that the S&P 500 is in the final stages, or Wave V, of its rally from the October 2023 low. We again note the bearish Relative Strength Index (RSI) divergence on the daily chart. Bearish RSI divergence occurs when prices make new highs, but the RSI fails to reach new highs.
Consequently, we remain patient, awaiting the development of a pullback in the coming weeks in the order of 5-8% — a pullback we are looking to buy.
S&P 500 daily chart
Nasdaq technical analysis
After a strong rally for the Nasdaq towards the end of 2023, we entered the new year with a more cautious and neutral mindset.
We continue to believe that the Nasdaq is in the final stages, or Wave V, of its rally from the low in October 2023. This perspective is bolstered by ongoing evidence of bearish Relative Strength Index (RSI) and a 'loss of momentum' type weekly candle.
In light of this, we remain patient, waiting for a pullback to develop in the coming weeks in the order of 5-10% — a pullback we are preparing to buy.
Nasdaq daily chart
- Source: TradingView. The figures stated are as of 29 January 2023. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.
IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.
The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.
No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk. Please see important Research Disclaimer.
Please also note that the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.
Explore the markets with our free course
Discover and learn how the range of markets you can trade on with IG Academy's online course – ‘Introducing the financial markets’.
Put learning into action
Try out what you’ve learned in this shares strategy article risk-free in your demo account.
Ready to trade shares?
Put the lessons in this article to use in a live account – upgrading is quick and easy.
- Trade on over 10,000 popular global stocks
- Protect your capital with risk management tools
- React to breaking news with out-of-hours trading on 70 key US stocks
Inspired to trade?
Put your new knowledge into practice. Log in to your account now.
Live prices on most popular markets
- Forex
- Shares
- Indices
See more forex live prices
See more shares live prices
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.
See more indices live prices
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.