Equities report: US stock markets remains stable ahead of December’s US employment report

Over the past week, major US stock market indexes remained relatively stable. Today we have a look at the fundamentals by discussing the release of the Fed’s December meeting minutes  later in today’s Asian session, the release of the US December employment report and drill deeper in the damaging presentation of NVIDIA as well as Meta Zuckerberg’s U turn. For a rounder view we are to conclude the report with a technical analysis of S&P 500’s daily chart. 

The Fed’s December meeting minutes 

The Fed seems  to continue to hesitate in cutting rates further. Currently Fed Fund futures imply that the market expects the bank to proceed with a rate cut in the May meeting and remain on hold after that until the end of the year, with a December 2025 being currently highly doubtfull. Yet, in its latest dot plot the bank signaled two rate cuts within the year. We also note the latest comment by Fed Board Governor Lisa Cook where she stated that "the labor market has been somewhat more resilient, while inflation has been stickier than I assumed at that time …Thus, I think we can afford to proceed more cautiously with further cuts". We also highlight the release of the Fed’s December meeting minutes later in today’s American session as a key event for US stock markets. Should the document maintain a dovish tone, practically underscoring the bank’s intentions to continue cutting rates albeit cautiously, we may see US stock markets gaining some support as it could enhance the market expectations for rate cuts to come. On the flip side a hawkish tone could weigh on US stock markets.   

December’s US employment report

We note that Tuesday’s US financial releases came in stronger than expected weighing on US stock markets, with the highlight being the ISM non-manufacturing PMI figure for December which came in higher than expected and implying a faster expansions of economic activity in the US services sector. On Friday we highlight the release of December’s employment report as the next big test for US stock markets. The Non-Farm Payrolls (NFP) figure is expected to  drop to 154k after November’s stellar 227k, the unemployment rate to remain unchanged at 4.2% and the average earnings growth rate also to remain unchanged at 4.9% yy. Should the rates and figures come in as expected, we may see the drop of the NFP figure disappointing traders somewhat and thus allow for a more dovish stance on behalf of the Fed, thus supporting US stock markets, albeit most would have been priced in allready. Yet the actual release is well known to take the markets by surprise and should it show a tighter than expected employment market for the past month we may see it weighing on US stock markets and vice versa.

NVIDIA’s presentation turned sour

We note the wide drop of NVIDIA’s share price on Tuesday. The presentation by NVIDIA’s CEO Jensen Huang at the CES tech trade show in Las Vegas seems to have left investors wanting for more, as per media. Investors may not have been convinced for the wide use of artificial intelligence in its products as they may have been expecting. The presentation was reported as being centred around the graphic cards for gamers, while investors may have been expecting wider plans on how NVIDIA could influence the chip market. Furthermore, despite the announcements being important as such, they seem to be lacking the short time upside potential. Despite the drop we expect the fundamentals to build support for the share’s price once again.

Zuckerberg’s axing of factcheckers

In a rare turn of events, Mark Zuckerberg announced that Facebook and Instagram are to end third party fact checking.  Factcheckers are to be replaced by user-generated “community notes” similar to those on X, whilst content moderation teams would relocate from California to Texas “where there is less concern about the bias of our teams”. The move is considered as a Trump appeasing and its characteristic that President elect stated that he was impressed by the Zuckerberg, stating that Meta has come a long way. Critics on the other hand, seem to be worries that it would increase inaccuracy and the spreading of false news. Beyond social and political issues we tend to see the act as possibly beneficial for the company’s share price at least in the short term as it adjusts to the new modus vivendi in the US.

Technical analysis

US30 cash daily chart

Support: 42400 (S1), 41620 (S2), 40800 (S3).

Resistance: 43380 (R1), 44200 (R2), 45000 (R3).

Dow Jones is constantly testing the 42400 (S1) support line, yet seems unable to break it. We tend to maintain a bias for a sideways motion of the index to be maintained between the 42400 (S1) level and the 43380 (R1) resistance line. For the time being we note that the Bollinger bands are narrowing which may imply less volatility. On the flip side there seems to be still a bearish predisposition for the index among market participants as the RSI indicator remains steadily below the reading of 50 for over two weeks now. Furthermore, we also note that 20 moving average, which is also the median of the Bollinger bands has decisively turned its direction southwards another indication of a bearish tendency. Finally, we also note the persistence of the index’s price action to continuously test the 42400 (S1) support line. Yet for a bearish outlook to emerge we would require the Dow Jone’s price action to clearly break the 42400 (S1) support line and take aim of the 41620 (S2) support level. Even lower we note the 40800 (S3) support barrier. On the flip side should the bulls take over, we may see the index breaking the 43380 (R1) resistance line which marks a turning point in the upward motion of the index’s price action on the 26th of December, and even higher we note the 44200 (R2) resistance base. In an extremely bullish scenario we note the 45000 (R3) resistance hurdle that marks practically a record high level for the index on the early days of December.