New York stocks expected to search for early-year direction in first week of the new year [Must-read Global Briefing before work]

Source

Bloomingbit Newsroom

Summary

It said the key variables for markets this year are Fed rate cuts and whether the US economy can avoid a recession.
It reported that major global investment banks presented end-2024 S&P 500 targets between 4,200 and 5,100.
It reported that as of 6 a.m. Jan. 1 Korea time, Bitcoin was up 0.70% at $42,637.

Forecast Trend Report by Period

[Global market indicators / as of 6 a.m. Jan. 1 Korea time]

[Wall Street close: Market wrap]

The S&P 500 fell 0.28% from the previous session to close at 4,769.83 on the 29th (local time). While it slipped slightly and failed to surpass its all-time high (4,796.56), it extended its winning streak to a ninth straight week and capped off 2023 with a 24% gain for the year.

Wall Street rebounded over the course of 2023. The S&P 500 rose 23.96% and the Dow climbed 13.45%. The Nasdaq Composite advanced 43.22% over the year. The Dow and the Nasdaq each rose 0.8% and 0.3%, respectively, setting their longest weekly winning streak since 2019.

If the S&P 500 continues its advance on Jan. 2, the first trading day of 2024, the prospect of a fresh record high remains on the table. By trading-day convention, the final five sessions of the year and the first two sessions of the following year—a total of seven days—are considered the Santa rally period. CNBC, citing the Stock Trader’s Almanac, reported that since 1969 the S&P 500 has gained an average of 1.3% during the Santa rally.

The key questions for markets this year are how much the Fed will cut rates and whether the US economy can avoid a downturn. In the new year, major central banks, including the US Federal Reserve (Fed), are expected to begin cutting rates in earnest.

The US presidential election is also scheduled for this year. While an election year typically brings heightened market volatility, there is also room for equities to be supported by more accommodative policies aimed at winning voters.

Against this backdrop, financial conditions, including the stock market, are expected to be more accommodative this year. The US 10-year Treasury yield, which at one point topped 5%, ended 2023 trading around 3.8%. Market experts see the 10-year yield potentially falling to the low-to-mid 3% range this year.

Major global investment banks see the S&P 500 ending 2024 between 4,200 and 5,100. According to FactSet, the median year-end 2024 target for the S&P 500 is 5,068.

While many investment banks expect the S&P 500 to set a new record and climb into the 5,000s this year, some forecast limited upside given how far the index has already risen.

JPMorgan Chase and Morgan Stanley put their end-2024 S&P 500 targets at 4,200 and 4,500, respectively, aligning with the bearish camp. Goldman Sachs, Deutsche Bank and Citigroup, by contrast, set their year-end 2024 target at 5,100. Some bulls are leaving room for the S&P 500 to reach as high as 5,500 by the end of 2024.

[Weekly market calendar]

Meanwhile, New York’s financial markets will be closed on the 1st for the New Year’s Day holiday. With a shorter-than-usual four-day trading week, markets are expected to look for early-year direction.

-1st

New Year’s Day. New York financial markets closed

-2nd

December S&P Global Manufacturing Purchasing Managers’ Index (PMI)

November construction spending

-3rd

Minutes of the December Federal Open Market Committee (FOMC) meeting and economic projections

November Job Openings and Labor Turnover Survey (JOLTs)

December Institute for Supply Management (ISM) Manufacturing PMI

Speech by Thomas Barkin, President of the Federal Reserve Bank of Richmond

-4th

December ADP employment report

Weekly initial jobless claims

December Challenger layoff report

December S&P Global Services PMI

-5th

December nonfarm payrolls and unemployment rate

December ISM Non-Manufacturing PMI

November factory orders

[European stocks close: Market wrap]

On the 29th (local time), the final trading day of 2023, major European stock markets finished broadly higher.

The pan-European STOXX 600 rose 0.94 points (0.20%) to close at 479.02. The index ended the year up 12.64%, in stark contrast to the 12.9% decline in 2022.

Germany’s DAX in Frankfurt added 50.09 points (0.3%) to 16,751.64. The DAX rose nearly 20% over the year despite concerns over a German economic downturn.

London’s FTSE 100 gained 10.5 points (0.14%) to 7,733.24, while Paris’s CAC 40 advanced 8.02 points (0.11%) to 7,543.18. For 2023 as a whole, the FTSE 100 rose 3.64% and the CAC 40 climbed 16.4%.

[China stocks close: Market wrap]

On the 29th, China’s key indices closed higher, supported by expectations that the central bank will step up efforts to bolster the economy.

The Shanghai Composite rose 20.23 points (0.68%) to 2,974.93, while the Shenzhen Composite gained 20.47 points (1.13%) to finish at 1,837.85.

On the Shanghai market, healthcare equipment and supplies posted the biggest gains, while airlines saw the largest decline.

[Crude oil]

International oil prices edged lower on the final trading day of the year but finished above $70 a barrel. February-delivery West Texas Intermediate (WTI) fell 12 cents (0.17%) from the previous day to settle at $71.65 a barrel. March-delivery Brent crude slipped 11 cents (0.14%) to settle at $77.04 a barrel.

[Gold]

On the 29th (local time) on the New York Mercantile Exchange, February 2024 gold futures ended the year’s trading down $11.70 at $2,071.80 an ounce.

Gold prices saw a modest pullback on the day.

This was interpreted as the result of the global US dollar posting a slight gain on the final trading day of 2023, pressuring gold.

Gold is expected to remain supported this year as the US Federal Reserve (Fed) cuts rates.

Justin Low, an FX analyst at ForexLive, said, "There is plenty of room for gold prices to rise," adding, "In January, seasonal tailwinds also appear likely to help."