S&P Rally Continues

US stocks continue to push higher this week with the S&P future seen breaking out to fresh all-time highs across early trading on Monday. The move comes despite a shift in the market’s Fed outlook. Pricing for a rate cut in March has now fallen below the 50% mark for the first time in months. With a slew of stronger-than-forecast data out of the US recently (NFP, inflation, retail sales) and hawkish commentary from the Fed, the market now judges the near-term chances of a rate cut as having weakened. Despite this, stock market sentiment remains firmly buoyant this week.

Traders Buoyed by Soft-Landing View

The likely driver behind the current uptick in stocks is the view that a soft-landing will be seen this year. Fear of a recession in the US had been a big headwind for stocks over late 2023. With rates still elevated and projections for a hard-landing taking hold, the S&P was seen correcting sharply over Q3/Q4. However, with consensus now shifting away from projecting a recession, traders are overlooking the near-term hawkish pushback from the Fed. Indeed, with the Fed signalling that rate cuts will likely be coming this year, this seems to be good enough for now.

US GDP in Focus

Looking ahead this week, away from the BOJ and ECB meetings, focus in the US will be on the upcoming GDP reading due on Thursday along with the latest PMI readings a day earlier. Any further data strength at this point should keep stocks supported, encouraging the view that a hard landing can be avoided.

Technical Views

S&P

With the market pushing into unchartered territory above the 4840 level, it’s worth noting some upper channel trend lines overheard which could serve as targets, resistance. The psychological level at the 50k mark is also a big number to note for the market. To the downside, any move back below 4840 will see 4627.50 come into view as next key support to note, along with the bull channel lows.