/market_analysis/forex-market-analysis-dollar-awaits-cpi-report-sp-500-valuations-reach-historic-highsforex/

    Forex Market Analysis: Dollar Awaits CPI Report, S&P 500 Valuations Reach Historic Highs

    February 9, 2024
    CURRENCIES:

    US Dollar and Upcoming CPI Report:

    • DXY index rose, influenced by higher U.S. Treasury yields.
    • Market awaits January inflation data; headline CPI expected to slow to 3.1%, core CPI to 3.8%.
    • Higher than expected inflation could boost U.S. dollar by altering Fed rate cut expectations.
    • Lower inflation may lead to dovish rate expectations and a weaker dollar.

    Technical Analysis for Currency Pairs and Gold:

    • Focus on EUR/USD, GBP/USD, and gold (XAU/USD) technical outlook.
    • Key support and resistance levels highlighted ahead of U.S. CPI release.

    STOCK MARKET:

    Stock Market Highlights

    S&P 500 Valuation Insights:

    • The S&P 500’s forward price-to-earnings ratio increased to 20.4, surpassing its historic average.
    • Despite high valuations, equities can remain costly before normalizing.
    • The index rose 21% since late October, nearing a significant 5,000 level but closed just below it.
    • Rising stock valuations contrast with increasing Treasury yields, hinting at competitive investment options.
    • Earnings forecasts for S&P 500 companies remain stable, with a 9.7% growth expectation for the year.
    • High valuations often lead to modest future performance, but current levels are below the extreme peaks of past market bubbles.
    • The index’s valuation is heavily influenced by the “Magnificent Seven” megacap stocks, trading at higher earnings multiples.
    • Lesser signs of speculative excess compared to past market peaks suggest a different market environment.

    Start your CFD Shares Trading journey with VT Markets now!