Stocks Rise on Policymaker Insights and Earnings Optimism
Ahead of the corporate results season, stocks are trading higher, buoyed by comments from policymakers hinting at a potential pause in interest rate hikes. The S&P 500 has seen gains for three consecutive days, a trend some analysts attribute to a recovery from oversold conditions. Amazon.com Inc. saw an uptick during its autumn sales for Prime members, while PepsiCo Inc. rose on the back of an optimistic forecast following better-than-expected third-quarter results.?
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Furthermore, various policymakers have shared their perspectives on the upcoming monetary policy meeting in the US, scheduled for the end of the month. Raphael Bostic, President of the Fed Bank of Atlanta, believes that current policy is sufficiently restrictive to bring prices down to the 2% target. Neel Kashkari, his counterpart in Minneapolis, expressed uncertainty about whether a rise in long-term Treasury yields would reduce the need for further rate increases, stating that it depends on the recent borrowing cost increase. Lorie Logan, President of the Fed Bank of Dallas, suggested that the recent spike in long-term Treasury yields might reduce the US central bank’s need to raise its benchmark interest rate again.?
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These comments indicate that policymakers are starting to realise that further policy action may be unnecessary as financial conditions have significantly tightened following the recent Treasury yield surge.?
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Investors eagerly await Fed meeting minutes, which could hint at the Fed not proceeding with the last hike indicated in its economic projections. Other vital data releases include Thursday’s consumer price index and Friday’s University of Michigan consumer sentiment survey. These will provide further insight into potential interest rate paths and help investors form more precise expectations.?
As a result, the S&P 500 closed Tuesday with three consecutive days of gains, resulting in a recovery of more than 3% after reaching the floor in the 200-day moving average around the level of 4,230.6, just when the market entered an oversold condition that was announced by the RSI indicator on 3rd October. Further down, it has a second floor at 4,165.7, its lowest price since late May. On the contrary, at the top and after the comments of Fed members, the price is again above the level of 4,300 and is heading to reach the next resistance at $4,446.9, which operated for the last time in mid-September. It's important to emphasise that we are in corporate earnings season, so depending on the results of the companies, if they exceed the market expectations, they could generate optimism in the stock market and continue to give a boost to the index and lead it to reach the level of 4,595.4, its most distant resistance and close to the highest price of the S&P 500 during 2023.?
Please note that this analysis is provided for informational purposes only and should not be considered as investment advice.?
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