Wall Street hits new highs amid Powell’s testimony and positive job data

Markets overlook Core PCE rise

US equity markets finished last week on a high note, locking in a sixteenth week of gains out of eighteen for the first time since 1971.

The gains came despite a robust Core PCE print, with markets as expected choosing to look through the number. This perspective was partly based on the view that the rise was driven by one-off New Year price increases in the services sector (including medical and financial services).

Fed rate cut expectations adjust

Additionally, in the lead-up to last week's core PCE release, expectations of Fed rate cuts in 2024 had repriced significantly lower. After starting the year with almost seven 25 bps Fed rate cuts, the rates market finished last week with 81 bps of rate cuts priced for 2024, in line with the Fed's projections of three rate cuts.

Upcoming economic insights

This week will provide further insights into the state of the economy and the timing of potential rate cuts with speeches by several Fed members, including Fed Chair Powell's Semi-annual Monetary Policy Testimony to Congress, as well as labour market updates that include the ADP employment report, JOLTS Job Openings, and Non-Farm Payrolls.

Non-Farm payrolls

Date: Saturday, 9 March at 12:30am AEDT

Recent job market strength

In January, the US economy added 353k jobs, exceeding market expectations of a 180k gain, with the unemployment rate holding steady at 3.7%. This stronger-than-expected number in January followed a very strong 333k increase in December and provided a further reminder that the US labour market remains tight.

February's employment outlook

For February, the US economy is expected to add 195k jobs with the unemployment rate projected to remain at 3.7%. The participation rate is expected to rise marginally to 62.6% from 62.5% previously. Average hourly earnings are forecasted to increase by 4.3% YoY in February, easing from 4.5% in January.

US unemployment rate

S&P 500 technical analysis

Following a brief consolidation period in mid-February ahead of Nvidia’s earnings report, the uptrend in the S&P 500 resumed, with the index closing last week at fresh record highs, 25% above its October low.

As long as the S&P 500 cash level remains above the uptrend and horizontal support at approximately 5060/50, the market's direction is likely upwards.

However, a consistent loss of support around 5060/50 would indicate that a more significant correction is on the horizon, initially towards 4900.

S&P 500 daily chart

Nasdaq technical analysis

Similar to the S&P 500, the Nasdaq saw a brief consolidation period in mid-February before regaining momentum, finishing last week at new record highs, 30% above its October lows.

Provided the Nasdaq cash level stays above initial support at 18,000 and does not fall below a range of horizontal support at approximately 17,300/100, the likelihood is for continued upward movement.

Should the Nasdaq breach support at around 17,300/100 on a sustained basis, it could signal the start of a deeper pullback towards 16,200.

Nasdaq daily chart

• ^{Source: TradingView. The figures stated are as of 4 March 2024. 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.}