The stock market witnessed a persistent upward trend with the S&P 500 maintaining a seven-week winning streak, inching closer to its previous all-time high. While the Dow Jones Industrial Average showed marginal movement, the S&P 500 surged by 0.45%, notably driven by gains in mega-cap tech companies like Meta Platforms and Alphabet. U.S. Steel shares soared by 26% following an acquisition announcement by Japan’s Nippon Steel. December marked robust performance across major indices, spurred by the Federal Reserve’s indication of potential short-term interest rate cuts in 2024 amidst cooling inflation. In the currency market, fluctuations in major pairs like EUR/USD, USD/JPY, Dollar Index, and British Pound were observed, influenced by speculation on rate cuts by central banks and economic indicators impacting their trajectories.
Stock Market Updates
The stock market saw a continuation of its upward trend as the S&P 500 maintained its seven-week winning streak. The Dow Jones Industrial Average experienced marginal movement, edging up by only 0.86 points to 37,306.02, while the S&P 500 climbed by 0.45% to reach 4,740.56, inching closer to its all-time closing high from January 2022, now just 1.2% away. Communication services stood out with a 1.9% increase in the S&P 500, notably driven by gains in mega-cap tech companies like Meta Platforms and Alphabet, which surged nearly 3% and more than 2%, respectively. Additionally, U.S. Steel shares soared by 26% following the announcement of Japan’s Nippon Steel acquiring the company for $14.9 billion.
December showcased robust performance across major indices, with the S&P 500 up by 3.8% for the month, while the Dow and Nasdaq rose by 3.8% and 4.8%, respectively. The positive investor sentiment stemmed from the Federal Reserve’s indication of expecting three short-term interest rate cuts in 2024, given the backdrop of cooling inflation. This sentiment shift led to a drop in Treasury yields, with the 10-year Treasury yield dipping below the 4% mark, further contributing to the market’s positive trajectory.
On Monday, the overall market saw a positive trend, with a collective rise of 0.45% across all sectors. Notably, Communication Services performed exceptionally well, soaring by 1.89%, followed by strong gains in Consumer Staples at 1.08% and Consumer Discretionary at 0.79%. Energy and Information Technology also contributed positively with increases of 0.76% and 0.27%, respectively. However, Utilities and Real Estate experienced declines, showing decreases of -0.30% and -0.35%, respectively, marking the only sectors that saw a downturn on that day.
Currency Market Updates
In the recent currency market updates, the focus was primarily on the fluctuations of major currency pairs, notably the EUR/USD and USD/JPY, alongside observations regarding the Dollar Index and the British Pound. The Dollar Index experienced a 0.1% decline amid speculations regarding potential rate cuts by the Fed, ECB, and BoE in 2024. The EUR/USD pair saw a 0.3% rise, influenced by the rebound in Bunds-Treasury yield spreads due to resistance from some ECB policymakers against early 2024 rate cuts. However, the pair faced concerns over German Ifo business sentiment and the risk of a potential recession reading, impacting its trajectory within a specific trading range.
Conversely, USD/JPY observed a 0.5% increase as it continued its recovery from prior plunges, influenced by market uncertainties surrounding aggressive Fed rate cut expectations versus the possibility of a BoJ hike. The broader trend for USD/JPY seemed downward, particularly if the BoJ failed to indicate a move away from negative rates. Meanwhile, the British Pound declined by 0.3%, distancing itself from recent highs following a dovish Fed and hawkish BoE meeting. Focus shifted to the upcoming UK CPI report, while observations noted a bearish divergence from last week’s highs and a strong demand for Sterling at its 200-day moving average, hinting at potential consolidation in the near term.
Picks of the Day Analysis
EUR/USD (4 Hours)
EUR/USD Holds Ground Amidst Dollar Pressure and ECB Speculation
The EUR/USD pair showed resilience, edging up after a recent dip, finding support above the 20-day SMA, and hovering above 1.0900 in a subdued market atmosphere. The US Dollar faced bearish pressures following the Federal Reserve’s dovish tone, although rate cuts seem distant despite initial forecasts. Meanwhile, in the Eurozone, lower-than-expected IFO business survey readings in Germany and steady but moderate inflation figures have raised expectations of potential ECB rate cuts, capping the Euro’s upward momentum below the 1.1030 mark. The market awaits the US Core PCE Price Index report for further cues on the greenback’s trajectory.
On Friday, the EUR/USD moved flat and moved around the middle band of the Bollinger Bands. Currently, the price moving slightly below the middle band, suggesting a potential for another consolidation movement. Notably, the Relative Strength Index (RSI) maintains its position at 57, signaling a neutral but still bullish outlook for this currency pair.
Resistance: 1.0945, 1.1017
Support: 1.0895, 1.0830
XAU/USD (4 Hours)
XAU/USD Maintain Soft Tone Amid Fed’s Stance on Monetary Policy and Market Optimism
Gold prices for XAU/USD held marginally above Friday’s closure at $2,018.19 per troy ounce despite subdued demand for the US Dollar triggered by softer government bond yields following the Fed’s decision to halt monetary tightening. The Fed’s stance, marking a pivot toward potential rate cuts, caused a retreat in US Treasury yields, notably the 10-year note, which currently stands at 3.95%. Wall Street’s positive performance limited the safe-haven appeal of the Greenback, constraining upward movement for gold. However, as financial markets approach the winter holidays, attention turns to upcoming inflation updates from the UK, Canada, and the Bank of Japan’s monetary policy decision, culminating with the US releasing the Core PCE Price Index, anticipated to show a slight decrease in November’s YoY inflation.
On Friday, XAU/USD moved in consolidation around the middle band of the Bollinger Bands. Currently, the price moving just below the middle band, suggesting a potential consolidation movement. The Relative Strength Index (RSI) stands at 53, signaling a neutral outlook for this pair.
