Jump to content

Wall Street: December outlook - US markets ride dovish momentum


Recommended Posts

US markets surged in November, fueled by falling rates. As December unfolds, can the momentum persist amid economic data uncertainties?

 

original-size.webpSource: Bloomberg

 

 Tony Sycamore | Market Analyst, Australia | Publication date: 

US stock markets kicked off a new month in style, as fixed income and equity markets reacted to the more dovish elements within Fed chair Jerome Powell's speech, including rates being "well into restrictive territory."

Before we look at what the year's final month might bring, it's worth revisiting some of November's key highlights.

  • US two-year note yields fell 41 bp from 5.09% to 4.68%
  • US 10-year note yields fell 60bp from 4.93% to 4.33%
  • US rates markets are now pricing 125bp of Fed rate cuts in 2024
  • The Nasdaq gained 10.67%
  • The S&P500 gained 8.92%
  • The Dow Jones gained 2898 points or 8.77%

Can the November rally extend into December?

The correlation is clear. US equity markets ripped higher in November, driven by falling rates. Behind the fall in rates was a dovish pivot by the Federal Reserve and a patch of cooler data. Rarely, if ever, has a central bank executed such an exquisitely timed pivot.

With November's astonishing moves as the starting point for December, the risk-reward of expecting more of the same has reached a more extreme point. While inflation data has been cooler in recent weeks, the market will want to see labour market data this week to support the cooling narrative and another leg higher in equities into year-end.

What is expected from Jolts and Non-Farm Payrolls data?

JOLTS Job Openings – The market expects job openings to decrease in October to 9.3 million from 9.55 million in September. NB While considered an accurate gauge of the labour market, JOLTS runs one month behind NFP.

Non-Farm Payrolls - The market expects a gain of 180,000 jobs in November, up from 150,000 in October. The unemployment rate is expected to hold steady at 3.9%, and average hourly earnings to ease to 4% YoY from 4.1% in October.

If either of these job numbers is much hotter than expected, it will likely cause the rates market to have second thoughts around the timing of Fed rate cuts, with the first cut currently fully priced for May.

US unemployment rate chart

 

original-size.webpSource: TradingEconomics

S&P 500 technical analysis

The S&P 500 remains the only one of the three key indices yet to break above its year-to-date highs.

While we remain bullish into year-end, we would not contemplate opening fresh longs at these levels. Instead, we would prefer to use dips back towards support at 4450/30, in anticipation of a retest and break of the July 4634.50 high. Above the 4634.50 high there is blue sky towards the November 2021, 4740.50 high, followed by the January 2022, 4808 high.

Aware that a sustained break below the support of the 200-day moving average at 4312 would warn that the rally has run its course, and that a deeper pullback is underway.

S&P 500 daily chart

 

original-size.webpSource: TradingView

Nasdaq technical analysis

The Nasdaq has followed the road map to perfection in recent months, bottoming as expected in the 14,200/14,000 support zone, before a stunning recovery to new highs.

Although we remain bullish into year-end, we would not contemplate opening fresh longs at these levels. Instead, we would prefer to use dips back towards support in the 15,700/450 area in anticipation of a push towards 16,400/500.

Aware that should the Nasdaq see a sustained break of support at 15,450, it would warn that the rally has run its course and that a deeper pullback is underway towards the 200-day moving average at 14,450.

Nasdaq daily chart

 

original-size.webpSource: TradingView

  • Source Tradingview. The figures stated are as of 4 December 2023. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.

 

 

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

Link to comment

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • image.png

  • Posts

    • I'm intrigued by NADA Protocol's vision of integrating blockchain technology into the gaming experience. The prospect of owning and trading in-game items through NFTs adds an exciting dimension to gameplay, offering real rewards and enhancing immersion. The marketplace controlled by the NADA token seems promising, providing a platform for users to engage in trading activities within the gaming ecosystem. I'm optimistic about NADA's potential to carve a niche for itself in the competitive gaming world, especially with its focus on creating a fun and economically rewarding gaming environment. Looking forward to exploring this new gaming frontier!
    • I see DIMO's innovative platform as a game-changer in the automotive industry, offering a new level of connectivity and transparency. With DIMO, I can envision having access to valuable vehicle data that can enhance my driving experience and provide me with insights into the car's condition. This not only makes the car-buying process easier but also instills confidence in the vehicle's history and performance. Moreover, the listing of DIMO's native token on Bitget exchange is exciting news as it will create more exposure for the project, potentially leading to further advancements and adoption in the automotive space.    
    • The growth trajectory and innovative approach of Autonolas are indeed impressive, signaling its potential to disrupt both the crypto and AI sectors. With its unique blend of off-chain services and AI capabilities, Autonolas has positioned itself as a key player in the evolving landscape. Furthermore, the listing of its utility token OLAS on Bitget exchange, coupled with a favorable price trend and deposit rebate, adds to the project's appeal and growth prospects. Exciting times ahead for Autonolas and its investors.
×
×
  • Create New...
us