Sage Investment Club

US inflation came in line with expectations. The kneejerk market reaction to the data was surprisingly negative, but the major US stock indices extended rally, while the US dollar dropped sharply.

The S&P500 ended the session at a very important technical level – the index is now testing the ceiling of the 2022 bearish trend and the 200-DMA to the upside.

The 200-DMA has not been broken since April 2022, and has, so far, acted as a sign to sell the top. It could take more (…better-than-expected earnings) to clear resistance around 3990-4000 range.

From now, investors’ focus will shift to earnings. According to FactSet, the S&P500 companies could post earnings growth of -4.1% for the Q4. Energy companies and tech stocks are an exception to this, of course. Energy companies will likely reveal another excellent quarter due to high energy prices, while tech stocks will likely deliver their second straight quarter of negative growth, with a decent 9.5% contraction expected across the sector.

But don’t forget that high expectations are difficult to beat, while low expectations are easier to beat, and the prices move regarding where the results fall compared to expectations.

Today, big US banks including JP Morgan, Citigroup, Bank of New York, Bank of America and Wells Fargo will reveal their Q4 results.


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