Stock optimism, as Netflix aims to create a colossus and Meta gets real about the Metaverse

US stocks managed to eke out a gain on Thursday to keep alive the hope of a fresh record high before year end. The S&P 500 rose by 0.1% and is now 60 points away from its all-time high. Futures are pointing higher again on Friday, currently the S&P 500 is expected to rise by 0.25% later today. If this gain can be sustained, then it could give stocks their second consecutive weekly gain.

Record highs beckon as we move towards year end

The question now is, will market push the main US blue chip index to new highs before the end of the week? The outcome could depend on the delayed US PCE inflation data that is released later today.  

PCE inflation to remain stable, and help drive the FOMO rally

Ultimately, while the PCE data will help us to gain a more complete picture of the US inflation landscape, this data is very backward looking so as long as it is roughly inline with expectations of a 2.8% then the rally could continue. If the PCE can remain below 3%, this would suggest that US price growth is stable, even if it is above the Fed’s target rate of 2%. The last two weeks of the year are typically strong  for equities, and there could be a fear of missing out on some extra gains before year end. Thus, FOMO could help drive stocks into year end and may help the market to overcome its fears of stretched valuations, particularly in the tech sector.

Meta gets real about the Metaverse

Corporate news could also drive stocks later today. Meta announced that it was cutting spending in its Metaverse unit and instead focusing on AI. This helped the stock to rally more than 3.5% on Thursday. The Metaverse has come in for criticism and Meta’s share price is lower by 5% in the last 6 months and is underperforming the overall US index so far this year, it has risen by just 13% YTD and is the worst performing member of the Magnificent 7 =. However, its fortunes have shifted in the past month, and it is now the second-best performer behind Google. News that it is pivoting fully towards AI could continue to be welcomed by investors.

Netflix aims to dominate Hollywood

Elsewhere, Netflix is also in focus after it was confirmed that it was in exclusive talks to acquire Warner Bros Discovery. Netflix’s share price has struggled in the past month, and fell 0.7% on Thursday, bucking the overall market trend. The stock is down 3% this week and 6% in the past month. It is typical for the acquirer in a deal to see some stock market weakness, although some investors may be concerned about a tie up of this size. Firstly, it would create a colossus in the TV and movie business, and this is causing fears of a monopoly, secondly, it would be symbolic of how tech conquered Hollywood, lastly, Netflix has never attempted a deal of this size before, which could lead to some concern about how the new mega company will be managed going forward. There are also political considerations, as a deal of this size will need approval by Federal regulators. Thus, Netflix’s share price could remain a laggard compared to the broader market as we lead up to the end of the year.

Sterling gets its mojo back

The pound is on track for its second weekly gain, as the dollar continues to struggle. GBP/USD is currently testing the $1.3350 level, and a break above here could open the way to $1.35. The pound is the second-best performer in the G10 FX space this week as the dollar tumbles.