Dow Jones, Nasdaq, S&P 500 weekly preview: Investors positioning for a Fed pivot

Dow Jones, Nasdaq, S&P 500 weekly preview: Investors positioning for a Fed pivot

© Reuters. Dow Jones, Nasdaq, S&P 500 weekly preview: Investors are positioning for a Fed pivot
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By Senad Karaahmetovic

The S&P 500 closed virtually 2.7% higher closing week after softer-than-anticipated wage development sparked a rally in threat sources. Inflation fell to 6.5% in December One year-over-One year, down from 7.1% in November and a 9.1% top in June.

The index is now attempting out the key descending trend line that connects lower lows with many analysts pointing to this zone as a key resistance field for the S&P 500. Futures are buying and selling virtually unchanged in pre-birth Tuesday.

NASDAQ Composite (IXIC) rallied 4.8% to shut above 11000 for the key time since early December. The index recorded the largest weekly derive since November on the bettering threat sentiment for tech shares.

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Dow Jones Industrial Average (DJI) closed the week 2% higher because the bulls are trying to prolong the rally to 35000, which became as soon as viewed closing in April 2022.

Q4 earnings off to a complex birth

The Q4 earnings season is underway after plenty of sizable banks reported on Friday. JPMorgan (NYSE:JPM) and Financial institution of The US (NYSE:BAC) both topped analyst expectations whereas Wells Fargo (NYSE:WFC) posted disappointing results, driven by higher-than-anticipated expenses.

JPMorgan CEO Jamie Dimon said that whereas the U.S. economic system “presently remains staunch,” he sees headwinds going by way of the sphere’s largest economic system.

“Alternatively, we aloof fabricate not know basically the most interesting attain of the headwinds coming from geopolitical tensions including the war in Ukraine, the vulnerable pronounce of energy and meals affords, power inflation that is eroding shopping energy and has pushed interest rates higher, and the unprecedented quantitative tightening,” Dimon said.

Goldman Sachs (NYSE:GS) inventory is down this day after the banking enormous uncared for Q4 earnings estimates, whereas Morgan Stanley (NYSE:MS) posted higher-than-anticipated top-line results. Later this week, Netflix (NASDAQ:NFLX) is due to document on Thursday after market shut with shares playing staunch few weeks.

What are analysts announcing about U.S. equities?

A must-bear Knowledge: “Our gaze is aloof more bullish than most, largely due to disinflationary forces are strengthening faster than the backdrop for earnings is deteriorating, a dynamic that must aloof establish a account for beneath equities. And there would possibly be now a sizeable positioning-driven tailwind as bearish traders are forced to reckon with the rising odds of a “gentle landing” ambiance. Alternatively, the ~4100 stage on the SPX will remain a complex one to surmount.”

Credit ranking Suisse: “Stock prices bear elevated 11.8% since October 12, the pause results of falling inflation and interest rates, expectations of a Fed live, and declining recession threat. While 4Q earnings season has appropriate begun, the 6.6% beat rate up to now needs to be added to the checklist of market tailwinds.”

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JPMorgan: “It appears that traders are increasingly positioning for Fed rate cuts (as implied by the forward curve) vs. believing within the Fed dot field (no rate cuts in 2023).”

Financial institution of The US: “FMS [Fund Manager Survey] traders gaze the S&P500 mark at 3892 in One year (vs 3999 this day). 37% gaze the S&P500> 4000 in subsequent 12m vs 57%

Citi: “The fresh direction has been decided in both prices and positioning, nonetheless fetch positioning remains a limited bit bearish on both the S&P and Nasdaq indexes. The rally has left all shorts in loss and an unwind of the $13bn shorts would possibly per chance per chance red meat up the rally reach term. More importantly, given the starting up level, the fresh positioning does not sight prolonged and there would possibly be room, up to now as positioning dynamics go, for this rally to establish for longer.”

Goldman Sachs: “After a staunch rally One year-to-date, we remain cautious on equities. While we seek knowledge from of a turning level in markets this One year, the hurdle rate for investing in equities has elevated. There would possibly be now an cheap different return within the market in bonds and cash. We proceed to hunt knowledge from of a barely ‘flat and fat’ market ambiance. The outlook for earnings would possibly per chance per chance per chance be the biggest due to higher exact interest rates are at possibility of constrain valuations.”

Morgan Stanley: “Endure markets are admire a Hall of Mirrors, designed to confuse traders and grab their money. Trust YOUR traditional assignment. For us, margins/earnings are at possibility of noticeably disappoint whether or not there would possibly be a recession, or not. We double down on that gaze this day... Our snide case S&P 500 EPS forecast for 2023is $195, nonetheless we're increasingly eyeing our endure case of $180 basically based totally on these aforementioned dynamics.”

BTIG: “Our gaze remains that right here's a counter-trend rally, nonetheless the subsequent two weeks needs to be more telling as to the factual duration of this switch.”

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