💻Tech Stocks Fuel Boost To Record Highs:“The S&P 500 (.SPX) posted a record high close on Friday for the first time in two years, fueled by a rally in chipmakers and other heavyweight technology stocks on optimism around artificial intelligence.” (Reuters)
😤Natural Gas Prices:“Natural gas futures plunged this week, a counterintuitive outcome for a market in which prices usually rise when snow starts piling up in heavily populated areas. Futures for February delivery dropped 24% over the course of the week thanks to forecasts for a return to above-average temperatures in the coming days.” (The Wall Street Journal)
🤖The Futures of Artificial Intelligence: “United Nations chief António Guterres on Wednesday called on political and business leaders to prioritize a global strategy dealing with the twin threats of artificial intelligence and the climate crisis." (CNBC)
💪Inflation & Economic Growth: “The latest updates on the economy and inflation will come with Thursday's estimate of U.S. gross domestic product (GDP) growth for the fourth quarter and Friday’s report on the Personal Consumption Expenditures (PCE) Price Index for December." (Investopedia)
👨💻Notable Earnings This Week: "Tesla stock, despite its slump, is still closely watched by investors. ServiceNow kicks off software earnings, while Intel, ASML, LRCX and KLAC offer more insight into the booming chip sector. D.R. Horton, Paccar and URI stock show strength beyond techs." (Investors Business Daily)
🤐Fed Blackout Period: “Federal Reserve staff, including those at the Chicago Fed, generally do not speak publicly between a week prior to the Saturday preceding a Federal Open Market Committee (FOMC) meeting and the Thursday following that meeting. This time is referred to as the FOMC blackout period.” The Current Fed blackout period runs from January 20 - February 1.” (ChicagoFed.org)
ECONOMIC GROWTH REPORT (GDP)
The U.S. GDP report is on Thursday. The Q4 GDP is expected to show 2.0% growth, easing from the Q3 growth of 4.9%, with current analyst forecasts ranging between 1.3-2.8%.
For GDP, the Atlanta Fed GDPNow estimate is tracking Q4 growth at 2.4%, above the 2.0% analyst consensus.
FED’S FAV INFLATION REPORT (PCE)
Traders will also watch the PCE and Core PCE prints to gauge price action in the fourth quarter 23.
The consensus is for U.S. core PCE to rise +0.2% month over month in December. WSJ Fed watcher Nick Timiraos says that, based on the CPI and PPI data for December, core PCE is projected to have been mild last month.
If the data is in line with expectations, the annual rate of PCE would fall to 2.9% from 3.2%.
INTEREST RATE FUTURES
Traders wonder if they've jumped the gun on interest rate cut speculation.
It's essential to watch for the PCE print, scheduled for release this Friday.
The probability of a rate cut by March, as indicated by Federal Reserve Fed Fund futures, dipped to 46%, down from nearly 76% one week ago. This shift triggered an uptick in treasury yields and the dollar.
Federal Reserve governor Christopher Waller's remarks, signaling a measured approach to rate cuts, triggered some market turbulence, with 2- and 30-year Treasury yields surging as high as 4.22% and 4.3%, respectively—an increase of 8 and 10 basis points on the day of the speech.
Addressing the Brookings Institution, Waller conveyed that the Fed is on the cusp of attaining its 2% inflation target. However, he urged caution, emphasizing that any inclination towards rate reductions must be executed with precision and diligence.
Waller suggested that a reasonable initiation of rate cuts could be considered "sometime this year," proposing three cuts, contrary to market expectations of five to six. While not overtly aggressive, Waller's comments did not lean significantly towards leniency, prompting a reassessment of interest rate expectations.
Wells Fargo aligns with a restrained Fed approach, projecting three cuts throughout 2024. This trajectory would position the Federal funds rate between 4.50% and 4.75%. It's essential to note that these forecasts are subject to change, emphasizing the importance of data over verbal indications in the ongoing battle against inflation.
Every Friday afternoon, Topstep Performance Coach John Hoagland fires up his charts and identifies the trends and “areas of importance” futures traders should look out for in the coming week. Read on to see what John’s keeping his eye on this week!
Trading is isolated and solitary. Every moment in the market is unique. It is random, unknown, and chaotic. It demands concentration.
Hoag~
Stops placed using market-generated information, based on where price proves your trade wrong, allow for better entries, and better probabilities of success. Static or financially-based stops have the highest probability of being hit.
Ray T.~
Trade the size that your mindset will support! If you find that your emotions kick in when you add size to a position, it is probably an indication that you are trading too much size. Less is more!
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