Market Weekly Outlook - NFP, CPI, and Japan’s High-Stakes Election
Week in Review
On Friday, the stock market experienced a significant surge, with the Dow Jones reaching a historic milestone of 50,000 points. This surge was characterized by a split in the technology sector, where chipmakers like Nvidia, AMD, and Broadcom saw their stocks rise over 7% due to anticipated profits from increased spending on artificial intelligence infrastructure. Conversely, Amazon's stock fell nearly 7% as investors reacted negatively to the company's plan to increase spending on AI data centers by over 50% this year.
The broader market showed positive performance, with the S&P 500 rising 1.73% and the Nasdaq up 1.91%. The Russell 2000 index also jumped 3.3%, indicating a shift in investment towards smaller companies. Earnings reports revealed a mixed bag, with Roblox shares climbing 11% due to strong future projections, while Molina Healthcare's stock plummeted 25% after disappointing profit forecasts. Overall, about 80% of companies reporting earnings exceeded analyst expectations, a notable increase from the usual average.
Central Bank Meetings
Both the European Central Bank (ECB) and the Bank of England (BoE) held their rates steady during uneventful meetings. The BoE's decision came after a close 5-4 vote, while the ECB faces challenges from a strengthening Euro, which could complicate monetary policy moving forward.
Foreign Exchange Market
The US dollar experienced a slight decline from its two-week high as investors shifted towards riskier assets. Despite this drop, the dollar finished the week stronger overall, buoyed by improved consumer confidence. The Japanese yen had a particularly poor week, marking its worst performance since October, as traders anticipated a national election that could impact economic management in Japan.
Commodities and Cryptocurrency
Gold prices rebounded, ending the week with gains as market participants sought bargains after previous declines. The price of gold rose nearly 4% to approximately $4,955 per ounce. Meanwhile, Bitcoin experienced volatility, surging over 8% to around $68,613 after a significant drop earlier in the week.
The Week Ahead
The upcoming week is poised to be critical for global markets, with a focus on rescheduled US economic data, including the Non-Farm Payrolls (NFP) and Consumer Price Index (CPI). The NFP report, expected to show a modest gain of 70,000 jobs, will be closely watched, especially in light of recent ADP figures indicating only 22,000 private-sector job gains.
In Japan, a snap election could significantly influence the yen's value, with expectations that a victory for Prime Minister Takaichi would lead to continued fiscal expansion. In Europe, GDP reports from the UK and Eurozone will be scrutinized for signs of economic recovery, while China will release CPI and PPI data to assess the impact of recent stimulus efforts.
Technical Analysis
The Nasdaq has shown signs of recovery, gaining nearly 3% and reclaiming the 25,000 level. A bullish engulfing candle suggests potential future gains, with the RSI approaching the neutral level, indicating a possible shift in momentum towards bullish sentiment.