Yesterday, stock market fluctuations were quite dramatic, with most of my favourite stocks falling more than 5% in premarket trading. Media outlets and social media have been fueling fear by heavily emphasizing the risk of a U.S. government shutdown tonight, which has heightened risk-averse sentiment among investors. As a result, stock futures have dropped significantly, with Nasdaq 100 futures declining over 1.7% in pre-market trading.
This article is written by Shernice if you like my article please hit the like button or do a repost.
However, at 8:30 AM, the Federal Reserve's key inflation indicator, the Personal Consumption Expenditures (PCE) index, was released. The U.S. PCE index for November showed a year-over-year increase of 2.4%, which is below the expected 2.5% but higher than the previous value of 2.3%. This marks the highest level since July, with a month-over-month increase of 0.1%, also lower than the anticipated and previous values of 0.2%. The core PCE price index rose by 2.8% year-over-year, again below the expected 2.9%, while month-over-month growth was 0.1%, falling short of the forecast of 0.2%. This data, significantly below market expectations, alleviated some investor concerns regarding inflation and rekindled hopes for interest rate cuts.
Although traders still believe that the Fed will pause rate cuts in January, they have increased bets on a potential cut in March, with current probabilities estimated at about 50%. There's also an expectation of roughly a 30% chance for another cut in October. This suggests that market expectations are gradually aligning with the Fed's projections released on Wednesday.
Wall Street institutions and strategists anticipate that softer inflation in November and further declines in December will leave the Fed with little justification not to implement rate cuts at upcoming meetings. According to analysts from Citigroup, the Fed is expected to cut rates at every meeting next year.
Market sentiment has significantly improved, leading to a rise in U.S. stock futures after initially declining Nasdaq 100 futures reversed their losses post-opening and surged nearly 2% during intraday trading. However, after 1 PM, bullish momentum began to wane, causing U.S. stock indexes to pull back and lose most of their intraday gains.
By closing time, major U.S. stock indexes had collectively risen over 1%, with the Dow Jones finally breaking its streak of eleven consecutive declines to post a substantial gain. Stocks were considered oversold in the short term, leading many bearish traders to take profits and potentially trigger a rebound yesterday.
Despite this recovery, buying pressure seems weak as the market failed to maintain above its five-day moving average by closing time, indicating that bearish sentiment still prevails. Next week is Christmas week, and if no significant negative events occur over the weekend—such as a government shutdown—the upward trend may continue for a few more days but is likely to face resistance around key moving averages.
The future trajectory of stocks will depend on whether Treasury yields can fall below the critical threshold of 4.5%. As long as yields remain above this level, optimism should be tempered. In mid-November, yields were firmly held at this level; thus, it remains to be seen if they can be pushed down again.
If yields drop below 4.5%, it could indicate that the Fed is taking measures to ensure stability through year-end trading days without excessive volatility, suggesting that overly bearish sentiments may not be warranted.
Today’s trading was characterized by significant fluctuations as about $7 trillion worth of options related to individual stocks and ETFs expired—marking one of the largest expiration days on record.
As we approach year-end and given current market dynamics—including rebalancing activities among major indices—whether this upward momentum can sustain itself remains uncertain from a technical standpoint. The core PCE index data provided some relief for risk assets but does not alter the Fed's cautious stance on rate decisions moving forward.
Looking ahead, key resistance levels for the S&P 500 are around 6,000 points while support is at approximately 5,850 points. If the S&P cannot break through 6,000 points and instead dips below 5,850 points again, it could accelerate downward trends.
The volatility index (VIX) experienced a dramatic drop today after spiking earlier in the week following significant market movements; this suggests that while immediate fears may have subsided, underlying uncertainties remain prevalent as we head into next year.
Overall market conditions indicate that while some recovery has occurred following recent downturns, caution is advised due to ongoing economic uncertainties and potential volatility in asset prices over the coming months.
@Tiger_comments @TigerClub @TigerPM @TigerObserver @Daily_Discussion
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.
