The U.S. stock markets have recently experienced a strong sense of optimism, with the VIX index dropping to 12.89 points two days ago, marking its lowest level since July 19, 2024. It is currently hovering around the 13-point level, indicating stability and investor comfort in the U.S. stock markets.
U.S. stock indices closed with a slight decline yesterday, with the S&P 500 falling by 0.19% and the Nasdaq 100 by 0.31%, following a series of consecutive increases that lasted for four days. However, these indices are still up by approximately 28% since the beginning of the year.
It is worth noting that several factors may provide positive momentum for U.S. stocks in the coming period, including:
- Seasonality: December and January are typically considered positive months for stock performance, a phenomenon often referred to as the “Santa Claus Rally.”
- Continued demand for products related to artificial intelligence and semiconductors.
- Continued U.S. interest rate cuts in the near future, with markets currently pricing in an 73% probability of a 25-basis point rate cut, and a 27% chance of rates being held steady at the upcoming Federal Reserve meeting on December 18.
However, despite these factors, these indices may face pressures and fluctuations due to several reasons, the most notable of which are:
- Escalating geopolitical tensions worldwide, such as in the Middle East and the Russia-Ukraine war, with concerns about the war expanding to include other regions and countries, which could create negative momentum for stock markets, especially since they are considered high-risk assets.
- Trump’s pledge to impose tariffs on imports from China, Canada, Mexico, and other countries, which could affect the prices of goods and commodities, leading to an increase in prices. This would hurt U.S. consumers and affect inflation, which could rise as well, thereby impacting the Federal Reserve’s monetary policy, which could raise interest rates, potentially leading to downward momentum for U.S. stocks.
It is also worth noting that the valuations of U.S. stock indices are currently considered very high, particularly for the S&P 500 and Nasdaq 100 indices. Therefore, we may witness profit-taking or a market correction in the coming period, which is a healthy development. However, the overall momentum remains positive, and we may continue to see new record levels being reached.
The markets are closely watching the release of the non-farm payrolls report, the unemployment rate, and the average hourly earnings data in the U.S. today.
Expectations are that the U.S. economy will add 202,000 new jobs in November, following an addition of 12,000 jobs in October. As for the unemployment rate, expectations are that it will rise to 4.2%, up from the October reading of 4.1%. Finally, analysts expect the average hourly earnings to increase by 0.3% on a monthly basis, which is lower than the October reading of 0.4%.
From a technical perspective, regarding the Nasdaq 100 index, there is alignment between the 20-day, 50-day, and 200-day moving averages, all showing an upward trend. The 20-day moving average is above the 50-day, and the 50-day is above the 200-day moving average.
The Relative Strength Index (RSI) currently stands at 66, indicating upward momentum for the Nasdaq 100 index. As for the MACD, there is a bullish crossover between the blue MACD line and the orange signal line, providing positive momentum for the Nasdaq 100 index.
Please note that this analysis is provided for informational purposes only and should not be considered as investment advice. All trading involves risk.
