Week Ahead: SPX500_m bulls down but not out

• SPX500_m set for first weekly loss since late-October
• US CPI & major bank earnings could move index
• SPX500_m under pressure on daily charts
• However, prices still above 50, 100 and 200-day SMA
• Key levels of interest at 4798, 4700 and 4640

It’s been a rough start to the new year for US equities with the SPX500_m heading for its first weekly loss since late October.

The index could see heightened volatility this afternoon thanks to the key US jobs report (Friday 5th January). But even as anticipation mounts, traders are bracing for more action in the week ahead.

All eyes will be on the incoming US inflation data and earnings announcements by major US banks which could rock the SPX500_m over the coming week.

Monday, 8th January

• EUR: Eurozone consumer confidence, retail sales, Germany factory orders
• USD: Atlanta Fed President Raphael Bostic speech

Tuesday, 9th January

• CNH: China money supply, new yuan loans
• AUD: Australia retail sales, building approvals
• EUR: Eurozone unemployment, Germany industrial production
• JPY: Japan Tokyo CPI, household spending
• USD: US trade

Wednesday, 10th January

• USD: New York Fed President John Williams speech
• Bitcoin: Deadline for SEC to vote on Bitcoin ETF applications

Thursday, 11th January

• AUD: Australia trade balance
• NZD: New Zealand building permits, home sales
• USD: US December CPI, initial jobless claims

Friday, 12th January

• CNH: China CPI, PPI, trade
• GBP: UK industrial production
• USD: US PPI, Minneapolis Fed President Neel Kashkari speech
• SPX500_m: Bank of America, BlackRock, Citigroup, JPMorgan, Wells Fargo results

It will be wise to keep an eye on the December US Consumer Price Index (CPI) data published on Thursday, January 11th.

Markets are forecasting: 

• CPI year-on-year (December 2023 vs. December 2022) to rise 3.3% from 3.1% in the prior month.
• Core CPI year-on-year to cool 3.8% from 4.0% in the prior month.
• CPI month-on-month (December 2023 vs November 2023) to rise 0.2% from 0.1% in the prior month.
• Core CPI month-on-month to cool 0.2% from 0.3% in the prior month.

Headline inflation is expected to have ticked higher due to rising energy prices, while the annual core inflation is seen cooling to 3.8% – its lowest in over two years.

Will US CPI help SPX500_m bulls or bears?

Stronger-than-expected US economic data this week has dampened bets around the Fed cutting rates as soon as March.

This dealt a blow to the S&P 500 which has a bunch of tech stocks that remain sensitive to US monetary policy expectations. When considering how tech stocks account for roughly 28% of the index’s value, the incoming US inflation report next week could spark fresh volatility.

• The SPX500_m could extend losses if the inflation numbers print above market forecasts.
• Should the US CPI report show evidence of cooling prices, this could push the SPX500_m higher.

US earnings season in focus

Fourth quarter earnings season kicks off on Friday 12th January, led by the biggest US banks.

Heavyweights such as JPMorgan, Wells Fargo, Bank of America, Citigroup and BlackRock will be under the spotlight. Their earnings report will be closely scrutinized by investors for fresh insight into the health of US banks which can be used to assess the health of the US economy.

Given how financial stocks account for just over 13% of the S&P 500, the bank earnings could move the index on Friday.

• SPX500­_m bulls may be inspired If bank earnings exceed forecasts.
• If earnings disappoint, this could pull the SPX500_m lower.

Watch out for the technicals…

The SPX500_m is under pressure on the daily charts with the recent break below the 4700 support helping bears.

However, the technical still favour bulls with prices trading above the 50, 100 and 200-day SMA while the MACD trades above zero.

• Sustained weakness below 4700, may open a path towards 4640, 4600 and the 50-day SMA.
• Should prices push back above 4700, this could trigger an incline back to the 2023 high.