Momentum Compass: analysing last week's moves and key drivers ahead
US equity markets faced headwinds last week with small-caps underperforming after a solid employment report pushed rate cut expectations back. Here's what drove markets and the key events to watch this week.
Last week's market recap
The US equity landscape saw notable divergence, with small-cap stocks bearing the brunt of selling pressure. The Russell 2000 index entered correction territory, marking its fifth week of underperformance in six weeks.
US stock indices 5-day comparison chart
Value stocks demonstrated resilience against market headwinds, while growth stocks experienced sharper declines. This pattern reflects growing investor concerns about the broader economic environment.
The trading signals showed the Nasdaq Composite recording its steepest weekly decline since mid-November, falling 2.3%. This significant move highlights the current market uncertainty.
The week began on a positive note with reports suggesting that the incoming US administration might adopt a softer stance on tariffs than initially expected. However, this optimism quickly dissipated after President-elect Donald Trump dismissed these claims, reigniting market uncertainty.
A stronger-than-expected US employment report provoked a surge in US yields - the 30-year US Treasury yield hitting the 5.00% mark - with the US dollar appreciating further and hitting a 14-month high. Rate cut expectations were pushed back amid heightened fears of persistent inflation, pushing global equity markets lower and compounding market challenges.
Key market drivers and influences
Mixed economic data releases heightened concerns about persistent inflation, creating additional challenges for market participants. This uncertainty has led many traders to reassess their positions.
The forex trading market saw increased volatility as currency traders responded to shifting economic indicators and policy expectations.
The spread betting landscape reflected these uncertainties, with traders adjusting their positions based on emerging trends.
The week ahead: UK consumer spending insights
This week UK retailers such as JD Sports, Ocado (Tuesday), Currys (Wednesday), Whitbread (Thursday) and DFS Furniture (Friday) are set to release Christmas trading statements, providing crucial insights into consumer behaviour during the critical holiday period.
These reports will offer valuable data for those engaging in share trading, particularly in the retail sector.
Understanding consumer spending patterns remains essential for traders looking to position themselves in retail-related markets.
The data will likely influence both CFD trading strategies and longer-term investment decisions in the retail sector.
UK, US inflation and earnings season outlook
On Wednesday UK and US December consumer prices for December will be closely monitored by market participants as will the 4th quarter (Q4) US earnings season with the likes of JPMorgan Chase, Bank of New York Mellon, Citigroup and Wells Fargo reporting. The earnings will provide important insights into corporate performance and economic momentum.
Traders utilising trading alerts will be monitoring these reports closely for potential trading opportunities.
The results could significantly impact market sentiment and trading volumes across various sectors at a time when several major US stock indices are slipping through key technical support zones.
These earnings reports will be particularly relevant for those engaged in options trading.
Market participants using automated trading systems may also need to adjust their strategies based on these releases.
How to trade current market conditions
- Stay informed about upcoming economic releases and earnings reports
- Consider whether you want to trade or invest
- Open an account with us to access global markets
- Use our advanced platforms to find trading opportunities
- Implement appropriate risk management strategies
You can view IG’s "The week ahead" here, and also IG's economic calendar here.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. 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. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
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