US equity indices closed higher across the board yesterday, specifically the S&P 500, Nasdaq 100, Dow Jones, and Russell 2000, with both the S&P 500 and the Russell 2000 recording new all-time highs. In contrast, US Treasury prices declined across all maturities, implying higher yields due to bond selling. At the same time, the US dollar index, which measures the dollar’s performance against a basket of six major currencies, fell by 0.30%.
Despite the rise in US equity indices, caution remains elevated, particularly amid continued selling pressure on US Treasuries and the dollar. The main driver behind this dynamic is a memorandum sent by the US Department of Justice to Federal Reserve Chair Jerome Powell. Powell responded firmly, stating that the allegations related to the cost of repairing or rehabilitating the Federal Reserve building last year are merely pretexts, and that the real motive lies in the Trump administration’s desire for a more accommodative monetary policy and a faster pace of interest rate cuts. Powell emphasized that Federal Reserve decisions are, in most cases, taken by consensus and are aligned with incoming economic data, reaffirming his commitment to this approach, the rule of law, and established legal frameworks.
It is worth noting that Powell’s term as Chair ends next May; however, he will remain a voting member of the Federal Open Market Committee (FOMC) until 2028. In this context, the Trump administration may seek to remove or legally challenge Powell in order to replace him with someone more dovish on monetary policy.
Markets are closely watching today’s release of the Consumer Price Index, which is a key pillar for the Federal Reserve’s policy decision later this month, especially as this will be the first fully comprehensive reading after recent government shutdowns affected data collection. Investors are also monitoring the start of the US corporate earnings season for the fourth quarter of last year, with particular focus on major banks, led by JP Morgan Chase.
Additionally, markets are awaiting tomorrow’s final ruling by the Supreme Court regarding tariffs, which could have a direct impact on financial markets, especially US assets, alongside scheduled remarks from several Federal Reserve officials throughout the week.
Citibank believes that investors are increasingly diversifying their portfolios away from US equities, while Goldman Sachs considers the criminal investigation into Powell to be a threat to the independence of the Federal Reserve.
From a technical perspective, indicators continue to point to a sustained upward trend in the S&P 500. The index recorded a new all-time high yesterday at 6,986 points, up around 2% since the beginning of the year. In addition, there remains a positive alignment of the 20-, 50-, and 200-day moving averages, with the 20-day average above the 50-day, and the 50-day above the 200-day, reflecting a technically supportive structure for the uptrend. The Relative Strength Index (RSI) stands at 63, indicating positive momentum, while a bullish crossover between the MACD line and the signal line further confirms the continuation of positive momentum.
Financial institutions such as Oppenheimer expect the S&P 500 to reach 8,100 points this year. Meanwhile, Wells Fargo forecasts a level of 7,800 points, Goldman Sachs 7,600 points, UBS and JP Morgan 7,500 points, and Bank of America 7,100 points.
On the more bearish side, Racks expects the index to reach 6,867 points, while BCI Research projects a much lower level of 5,280 points.
Please note that this analysis is provided for informational purposes only and should not be considered as investment advice. All trading involves risk.
