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S&P 500 rally (SPX) and sustained its upward trajectory last week. Driven by the surge in risk assets following the decline in U.S. Treasury yields since late October. The index closed the week with a 2.2% gain, securing its first close above 4,500 since August.
The prevailing optimism in the stock market stems from expectations that the Federal Reserve may consider reducing interest rates amid indications of inflation cooling. The softer-than-expected October Consumer Price Index (CPI) prompted a significant adjustment in market expectations. Reducing the likelihood of additional Fed rate hikes.
The S&P 500 achieved its third consecutive week of gains, marking its longest weekly winning streak since July.
Last week, Federal Reserve Vice Chair for Supervision Michael Barr reaffirmed the probability that officials are either at or near the completion of their tightening measures. However, Federal Reserve Bank of San Francisco President Mary Daly expressed uncertainty among policymakers regarding whether inflation is progressing toward their 2% target.
The Nasdaq Composite Index (IXIC) gained 2.4%, while the Dow Jones Industrial Average (DJI) closed 1.9% higher.
S&P 500 Rally and Market Focus: FOMC Meeting Minutes and Earnings Reports in the Week Ahead
In the kight of S&P 500 Rally and In the upcoming week, investors will closely monitor the release of the November Federal Open Market Committee (FOMC) meeting minutes scheduled for Wednesday.
Analysts at Bank of America remarked, “The Fed now faces diminishing returns on hawkish rhetoric, given its status quo since July. The minutes will be scrutinized for any discussion on the nature and impact of financial tightening. Whether exogenous or aligned with Fed expectations.”
Regarding earnings, the spotlight will be on Nvidia (NVDA), reporting on Tuesday after the market closes. Zoom Video (NASDAQ:ZM) is due to report on Monday. With other notable reports from Lowe’s (NYSE:LOW), Medtronic (NYSE:MDT), Analog Devices (NASDAQ:ADI), Autodesk (NASDAQ:ADSK), Baidu (NASDAQ:BIDU), HP Inc.
Analyst Perspectives: Insights into Current Market Trends and Future Expectations
Sevens Report analysts observed, “The foundational elements supporting the market rally persist, although in the short term, based on fundamentals, the market appears somewhat overextended. Nevertheless, substantial support for stock prices persists, and the likelihood of a prolonged decline remains minimal.”
Oppenheimer analysts expect the market to advance until the Fed cuts its policy rate. A scenario they anticipate occurring within the next 6-12 months.
JPMorgan analysts believe that bond yields poised to move lower. While acknowledging the positive initial equity reaction to peaking bond yields, they express skepticism about the sustainability of this trend.
Also Read: EUR/USD Rose: ECB Guidance to Challenge Advancement To $1.10
Roth MKM analysts point out the seasonally strong week for the equity market but express concern about recent softer economic data. They find it intriguing that the equity market, historically unreliable in predicting Federal Reserve interest rate decisions, has performed well despite the potential for rate cuts next spring.
Evercore ISI analysts anticipate a significant move in the S&P 500, regardless of the market’s reaction to Nvidia, emphasizing that options markets are attractively priced for various directional movements.
The S&P 500: The Standard & Poor’s 500, commonly referred to as the S&P 500, is a prominent stock market index designed to gauge the stock performance of the 500 largest companies listed on United States stock exchanges.
