Stocks have been mixed at the end of the week, as the market recalibrates its expectations for interest rate cuts after push back from Fed and ECB members. The FTSE 100 is set to close the week down more than 2%, the Eurostoxx is currently down 0.8% for the week and the Dax is down by more than 1%. US indices are bucking this trend, the Nasdaq is up 1.68% so far this week, and the S&P 500 is higher by 0.84%. The tech sector and communication services are still driving the US market, and Europe is missing out because of its lack of tech exposure.
Interestingly tech is still rallying even though Treasury yields are moving higher, and the chances of a March Fed rate cut are slipping sharply. The 2-year yield touched 4.4% earlier on Friday, its highest level since mid-December. The market now sees an even chance of the Fed cutting rates in March, last week the market was pricing in a near 80% probability of a rate cut. Tech is continuing to benefit from the good news from Taiwan Semiconductors that has driven faith that the AI boom can continue. This is benefitting the tech firms that are leading the way for the AI tech boom. Nvidia is up by more than 5% so far this week, and continues to outperform in the broader market and tech space. This suggests that the AI theme has further to run, and we expect to continue to see outperformance for the major players in this space.
Start investing today or test a free demo
Create account Try a demo Download mobile app Download mobile appThere was a strong pickup in consumer confidence in the US, the Uni of Michigan consumer sentiment survey was 78.8 in January, up from 69.7 in December. Inflation expectations also fell. Inflation expectations one year ahead fell to 2.9%, down from 3.1%, while longer-term inflation expectations also dipped to 2.8% from 2.9%, and were lower than expected. This is feeding the view that the US economy has started 2024 on a strong note, and that the disinflation trend is still intact even after the pick up in CPI for December.
Overall, market sentiment has been mixed this week, but US stocks are absorbing the push back in rate cut expectations well. Economic data has so far helped to boost sentiment and the S&P 500 is close to its all time high of 4,796 from January 2022. Next week is a busy one for earnings releases. Key releases to watch include Netflix, Johnson and Johnson, IBM, Microsoft, Tesla, Boeing, Intel, Visa, American Express and Chevron. We will also be watching for the preliminary PMI reports for January for Europe and the US, and anything that can push expectations for interest rate cuts further into the future.
The content of this report has been created by XTB S.A., with its registered office in Warsaw, at Prosta 67, 00-838 Warsaw, Poland, (KRS number 0000217580) and supervised by Polish Supervision Authority ( No. DDM-M-4021-57-1/2005). This material is a marketing communication within the meaning of Art. 24 (3) of Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU (MiFID II). Marketing communication is not an investment recommendation or information recommending or suggesting an investment strategy within the meaning of Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (market abuse regulation) and repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC and Commission Delegated Regulation (EU) 2016/958 of 9 March 2016 supplementing Regulation (EU) No 596/2014 of the European Parliament and of the Council with regard to regulatory technical standards for the technical arrangements for objective presentation of investment recommendations or other information recommending or suggesting an investment strategy and for disclosure of particular interests or indications of conflicts of interest or any other advice, including in the area of investment advisory, within the meaning of the Trading in Financial Instruments Act of 29 July 2005 (i.e. Journal of Laws 2019, item 875, as amended). The marketing communication is prepared with the highest diligence, objectivity, presents the facts known to the author on the date of preparation and is devoid of any evaluation elements. The marketing communication is prepared without considering the client’s needs, his individual financial situation and does not present any investment strategy in any way. The marketing communication does not constitute an offer of sale, offering, subscription, invitation to purchase, advertisement or promotion of any financial instruments. XTB S.A. is not liable for any client’s actions or omissions, in particular for the acquisition or disposal of financial instruments, undertaken on the basis of the information contained in this marketing communication. In the event that the marketing communication contains any information about any results regarding the financial instruments indicated therein, these do not constitute any guarantee or forecast regarding the future results.
