Morning Brief
Headline News:
Inflation and its impact on bond markets and the Federal Reserve’s monetary policy trajectory remain the primary focus for investors — at least until Friday when some of the big banks will kick off the fourth-quarter 2023 earnings season.
The S&P 500 sits just 40 points, or 0.8%, shy of its record high of 4796.6 touched a little over two years ago, after rallying strongly in the last few months primarily on hopes easing inflation will allow the Fed to lower interest rates in 2024. Ten-year Treasury yields, the benchmark for borrowing costs, have fallen from 5% in October to the current 4.003%.
For this bullish narrative to play out, inflation must be seen continuing to fall back to the central bank’s 2% target. Great importance is therefore being placed on the consumer price index for December, which will be published at 8:30 a.m. Eastern on Thursday.
Economists forecast that annual headline CPI inflation will inch up from 3.1% in November to 3.2% last month. The core reading, which strips out more volatile items like food and energy, is expected to fall from 4% to 3.8%.
(Jamie Chisholm Market Watch)
Markets:
The S&P 500 closed higher at 4,756.50 and remains above the 20-day moving average. The trading indicated an index potentially starting another uptrend soon, and the breadth indicators have moved out of the overbought zone. So, we feel the S&P 500 will test the resistance zone at 4,780.98 after forming a small base at these levels. However, tomorrow’s December inflation data report could have a negative effect if inflation increases more than expected.
We are currently Intermediate-term bullish and short-term bullish.
John N. Lilly III CPFA
Accredited Portfolio Management Advisor℠
Accredited Asset Management Specialist℠
Portfolio Manager, RJFS
Partner, DJWMG
Windsor Wealth Planners & Strategist
Futures trading is speculative, leveraged, and involves substantial risks. Investing always involves risk, including the loss of principal, and futures trading could present additional risk based on underlying commodities investments.
The Relative Strength Index (RSI), developed by J. Welles Wilder, is a momentum oscillator that measures the speed and changes of price movements.
.The percentage of stocks trading above a specific moving average is a breadth indicator that measures internal strength or weakness in the underlying index. The 50-day moving average is used for short-to-medium-term timeframes, while the 150-day and 200-day moving averages are used for medium-to-long-term timeframes. Signals can be derived from overbought/oversold levels, crosses above/below 50%, and bullish/bearish divergences.
The Dow Jones Industrial Average (DJIA), commonly known as “The Dow,” is an index representing 30 stocks of companies maintained and reviewed by the editors of the Wall Street Journal. The Russell 2000 Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index, which represent approximately 8% of the total market capitalization of the Russell 3000 Index.
The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S stock market. Past performance may not be indicative of future results. Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. Individual investors’ results will vary. Opinions expressed are those of the author John N. Lilly III, and not necessarily those of Raymond James. “There is no guarantee that these statements, opinions, or forecast provided herein will prove to be correct. “The information contained was received from sources believed to be reliable, but accuracy is not guaranteed. Investing always involves risk, and you may incur a profit or loss. No investment strategy can guarantee success. The charts and/or tables presented herein are for illustrative purposes only and should not be considered as the sole basis for your investment decision. International investing involves special risks, including currency fluctuations, different financial accounting standards, and possible political and economic volatility. Investing in emerging markets can be riskier than investing in well-established foreign markets.
This is not a recommendation to buy or sell any company’s stock mentioned above.
US government bonds and treasury bills are guaranteed by the US government and, if held to maturity, offer a fixed rate of return and guaranteed principal value. US government bonds are issued and guaranteed as to the timely payment of principal and interest by the federal government. Bond prices and yields are subject to change based on market conditions and availability. If bonds are sold prior to maturity, you may receive more or less than your initial investment. Holding bonds to term allows redemption at par value. There is an inverse relationship between interest rate movements and bond prices. Generally, when interest rates rise, bond prices fall, and when interest rates fall, bond prices generally rise.
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