Historic records on Wall Street

Wall Street indexes have reached new all-time highs. The last two sessions of last week were dominated by buyers, which resulted in dynamic increases in the Dow Jones, Nasdaq100 and SP500. Technology companies performed well, driven by expectations of the artificial intelligence boom. The market reacted positively to the data on consumer sentiment. The sentiment could have been improved by falling inflation expectations in the US.

Commercial banks support reductions

Even though the market last week adjusted its valuation of interest rate cuts by major central banks, this did not prevent US stock indices from setting new ATH levels. The mood was not damaged by the comments of Fed central bankers. Daly from San Francisco was a bit more hawkish, but Bostic from Atlanta or Goolsbee from Chicago they spoke openly about reductions, the scale and launch time of which will largely depend on data.

Last Friday, Fed Fund futures were trading at 49%. chances (currently about 42%) for a 25 bp rate cut by March, compared to 83 percent week earlier. The market assumes a total of 135 bp of reduction by the end of the year.

Some commercial banks are in favor of a March cut because the Fed is unlikely to renew its term financing program, which it began amid the crisis of regional institutions last spring.

10-Year Yields bonds US government on Friday approached 4,2%. but in the second part of the day they fell towards 4,12%. 2-year securities reached a new local peak at 4,42%. and at the end of the day on Friday they made a correction towards 4,39%.

A distant vision of a larger correction

Friday and Thursday's increases resulted in... the emerging RGR pattern on the Dow Jones or SP500 has been negated and so far the vision of a larger downward correction has been dismissed. The situation on the chart of the main currency pair is also pro-growth at this point. The EUR/USD rate has formed a double bottom pattern. The increases had already started before the weekend. Additionally, there is a great similarity in the range of the last two downward corrections main currency pair. This factor also suggests that increases are now a more likely scenario.

From this week's data, the preliminary US GDP reading for the fourth quarter is noteworthy. We'll get that on Thursday. On Friday, attention will be focused on the report on Americans' spending. What should be taken into account here is what the Fed's preferred measure of PCE and PCE core inflation will develop. Monthly dynamics should increase to 0,2 percent. On an annual basis, headline PCE is expected to fall from 3,2%. up to 3 percent and the base rate is to remain at 2,6 percent. Of course, we should not forget about the decisions of central banks on interest rates in the euro zone, Canada, Japan, Norway and Turkey.

Source: Łukasz Zembik, OANDA TMS Brokers