US Weekly Report: US non-farm payrolls on watch this week
Major US indices have kickstarted the new week on a firmer footing.
Growth sectors on watch to drive Wall Street gains
Major US indices have kickstarted the new week on a firmer footing, but with a clear selective lean into growth stocks amid expectations that the CES 2025 event may unveil more cutting-edge advancements in artificial intelligence (AI) to renew market optimism around AI stocks. Apart from that, market sentiments have been sensitive to speculations around Trump’s tariff, with conflicting signals over the scale of US trade restrictions resulting in some late-day rollover in major US indices.
We may expect Trump’s rhetorics around tariffs to remain tough for now, and while there is the potential for any restrictions to be negotiated down eventually, banking on the prospect of less aggressive tariffs at this stage could still seem premature. Therefore, we may still look for recent retracement in the US dollar to be short-lived, where we may need to see a break below yesterday’s low at the 107.50 level for bearish conviction.
What to expect for US economic data this week?
The aftermath of the December Federal Open Market Committee (FOMC) meeting has prompted market expectations to reprice for two 25 basis point (bp) cuts through 2025, down from the previous four cuts, with economic resilience on watch this week to offer the validation for the renewed hawkish views. The Institute for Supply Management (ISM) services Purchasing Managers' Index (PMI) data on Tuesday will offer an immediate data point to watch, with consensus looking for a stronger expansion in services activities to 53.5 from the 52.1 prior.
The highlight of this week will be the first US job report for the year, set for release on Friday, with consensus looking for a softer US job addition of 159,000 versus the 227,000 prior. The US unemployment rate is expected to be maintained at 4.2%, in line with the Federal Reserve (Fed)’s latest economic projections, while wage growth may grow at 0.3% month-on-month, slightly easing from the 0.4% prior. The totality of such data may reflect some cooling in the labour market, but the lack of significant economic risks may still keep policymakers leaning towards a more gradual path of rate cuts ahead.
S&P 500: Still trading within December FOMC meeting range
Recent moves in the S&P 500 saw buyers attempting to defend its December FOMC meeting low at the 5,830 level, with two interactions with the horizontal level marked with the formation of long-tailed bullish pin bars as a reflection of some dip-buying. This also marked a successful defence of its daily Ichimoku Cloud zone, alongside its 100-day moving average (MA).
That said, greater conviction for buyers will now hinge on a move above its December FOMC high at the 6,070 level to indicate a breakout from its current near-term ranging pattern. The risks to buyers will come with any dip back below the 5,861 level, which may then pave the way for a deeper retracement towards the 5,674 level next, where a support confluence from a broad channel trendline and its key 200-day MA will stand.
Levels:
R2: 6,235
R1: 6,070
S1: 5,861
S2: 5,674
Source: IG charts
Sector performance
Sector performance over the past week showed growth sectors resuming their dominance, with the communication services and technology sectors gaining 1.8% and 2.8% respectively. Higher US Treasury yields continued to be side-eyed, but tech optimism surrounding the CES 2025 has given rise to more selective risk-taking appetite. Nvidia’s share price is up more than 9% for the week, while Meta is up more than 5%. On the other hand, Apple and Tesla are both down more than 4%. The energy sector came in at the top of the performance table, aided by a 4.5% bounce in crude oil prices. Increased heating demand amid a US winter storm has kept oil prices supported, but weaker economic data remains a key overhang to address over the longer term. Ahead this week, the growth-value divergence will remain on watch, with resilient US labour data likely the key in determining whether improved risk appetite may see some broadening out towards value.
Source: Refinitiv
Source: Refinitiv
Source: Refinitiv
*Note: The data is from 30th December 2024 – 6th January 2025.
Source: Refinitiv
*Note: The data is from 30th December 2024 – 6th January 2025.
Source: Refinitiv
*Note: The data is from 30th December 2024 – 6th January 2025.
This information has been prepared by IG, a trading name of IG Markets Ltd and IG Markets South Africa 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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