Investors are still digesting the Friday economic data, including a hotter-than-expected jobs report, while also preparing for the busy calendar of macro catalysts, including the release of U.S. inflation data and FOMC decision.
Still, the hot NFP report didn’t stop the S&P 500 (SPX) from printing the fresh 2023 high, ultimately ending the week 0.2% higher. This way, the index recorded the highest weekly close since January 2022.
“This set of data justifies a modest hawkish adjustment in Fed expectations (such as 5/1 instead of 3/20 for the first cut, and ~110bp of cumulative cuts instead of ~140bp), but we don’t think the policy path in 2024 shifted dramatically,” analysts at Vital Knowledge said in a note.
The Nasdaq Composite Index (IXIC) rose 0.7% but didn’t manage to follow the S&P 500 in printing the new high. The Dow Jones Industrial Average (DJI) ended the week flat.
Busy week
On Tuesday morning, the US Consumer Price Index (CPI) will be released, providing insights into inflation trends. The FOMC meeting concluded on Wednesday, December 13. According to a report in the Wall Street Journal, Fed officials are unlikely to seriously consider rate cuts at the upcoming meeting.
However, the central bank is of the view that policy does not need to be maintained at economically restrictive levels indefinitely. The Federal Reserve appears to be assessing the economic landscape and may gradually shift towards a more accommodative stance if warranted.
“We don’t expect a significant tightening of financial conditions or much higher recession risk to become the base case again, which favors small caps and other risk-on factors,” analysts at 22V Research said.
Elsewhere, Thursday will see decisions from central banks including the Swiss National Bank (SNB), Norges Bank, Bank of England (BOE), and European Central Bank (ECB). On Friday morning, the U.S. and EU flash PMIs for December will be closely watched. Treasury auctions, including 3-year, 10-year, and 30-year, will be important market events.
On the earnings front, Oracle (NYSE:ORCL) and Adobe (NASDAQ:ADBE) are the most notable reported this week. Investors will be also closely watching Intel’s (NASDAQ:INTC) AI chip event on Thursday.
What analysts are saying
Analysts at Roth MKM: “It is bullish that price was able to consolidate through time, rather than work off the recent overbought conditions with a pullback. Many of the key stocks, which are primary drivers of market returns, are no longer overbought and could continue to rally into year-end. The obstacle of the market continues to be the Federal Reserve and their interest rate path. The intention of the market is to move higher if rates come down.”
Analysts at Oppenheimer: “We initiate a year-end target price of $5,200 and an earnings projection of $240 for the S&P 500 in 2024. We assume earnings growth of 9% and a P/E multiple of 21.7x.”
Analysts at Citi: “We look for further S&P 500 upside in the year ahead. However, investors need to be prepared for changing conditions as 2024 unfolds. We set a year-end 2024 S&P 500 target of 5100 premised on a $245 index EPS estimate. Our mid-2024 target is lowered to 4800, which allows for economic softening during the first half. Broadening beyond 2023’s Mega Cap Growth leadership is a key theme. Following the strong Q4 2023 rally, pullbacks should be expected, and bought into, as a shifting Fed narrative unfolds.”
Analysts at Goldman Sachs: “We expect Growth will outperform in our baseline scenario where economic growth remains modest and rates do not rise much further. We also expect Growth would outperform if rates fall on the back of dovish Fed pricing or due to softer economic growth data. On the other hand, if economic growth substantially accelerates or the economy enters a recession, we expect Value will outperform.”
https://www.investing.com/news/stock-market-news/dow-jones-nasdaq-sp-500-weekly-preview-focus-shifts-from-nfp-to-cpi-and-fomc-3253965
