The equity market has been on a sky ride as major indices continued to hit new records closing. We saw fresh highs on Monday again as technology counters maintained their momentum with growing optimism that artificial intelligence can help drive capital spending demand.
📪Economic data, Earnings, FOMC Ahead.🖨
Given the Fed’s blackout period before FOMC next week, we have a relatively quiet period. Given this situation, economic data release, such as the GDP and PCE data, will be necessary in the later week. Investors will also shine a spotlight on corporate earnings with a focus on guidance.
🎢Falling Treasury Yield Supports Markets.🎲
The retracement of the 10-year Treasury yield provides another tailwind for stocks to move higher as risk-on sentiments thrive in a low-yield environment. We have seen the yield falling below 4.1% during the trading session.
🎯March Odds of A Rate Cut Are Dialling Down.🥁
With a growing string of firm labour data and economic strength, traders are now pricing in lower chances of an early rate cut in March. Based on CME’s FedWatch Tool, the estimates of a rate cut in March stood at 40.5%. This is a dramatic drop from the 80% level seen in the second week of January.
This comes without much surprise as many Fed officials are pushing back against early rate cuts, which are seen as “premature”.
It is 23 January, Tuesday, 8.40 am in Singapore and 8.40 pm in New York. The market is enthusiastic about a new bull rally cycle. Still, we are mindful of any healthy retracement should investors take a breather to consolidate their gains ahead of key corporate earnings and economic data. We maintain an upward trend should SPY hold a 477 level.
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All is well.