This Week: Wst30_m braces for CPI, Wall Street earnings

US stock markets are off to a losing start to 2024.

After setting a new record high (for intraday prices) at 37865 on January 2nd, 2024, the Wst30_m has since faltered.

Note the Wst30_m tracks the Dow Jones Industrial Average index, which tracks the performance of 30 US blue-chip stocks.

The recent pullback may also have been due to technical forces, as its 14-day relative strength index moderates back below the 70 threshold that marks "overbought" conditions.

However, once the pullback is over, this could help the Wst30_m form a stronger base from which to launch further attempts at fresh record highs!

Why have US stock indexes been falling at the start of 2024?

Recent declines were fuelled by last week’s hawkish FOMC minutes and the stronger-than-expected US jobs report.

Markets are lowering their bets for how quickly the Fed will start cutting interest rates this year.

Coming into 2024, markets had predicted a 96% chance that the Fed will lower its benchmark rates starting in March.

However, at the time of writing, those odds now stand at 66%.

This week’s key events could either drag Wst30_m even lower, or put it on a path towards a new record high.

Although Wall Street forecasts that the Dow will eventually end 2024 at a new all-time peak, perhaps 6% higher from current levels, traders will have to take it one week at a time.

Events Watchlist:

• Thursday, January 11: US December consumer price index (CPI)

Although headline US inflation, as measured by the CPI, is expected to tick back up to 0.2% month-on-month and 3.2% year-on-year, the core CPI numbers (which exclude the more volatile prices for food and energy) are expected to ease lower.

Here are economists' forecasts for the Core CPI figures:

- month-on-month: 0.3% (same as November's number)

- year-on-year: 3.8% (lower than November's 4% year-on-year figure)

If the above forecasts prove true, this would mean that the Core CPI year-on-year numbers has come in below 4% for the first time since May 2021.

However, higher-than-expected inflation overall may force markets to push back bets for the Fed to cut its benchmark rates in 2024.

Such prospects may force Wst30_m to retreat below the 37,000 line.

• Friday, January 12: JPMorgan Chase Q4 2023 quarterly earnings

Note also that JPMorgan accounts for 3% of the Dow index, and other banking/financial stocks tend to react in tandem to JPMorgan’s numbers.

Also, JPMorgan’s shares are forecasted to move by 3%, either up or down, when US markets open shortly after the bank has revealed its financial numbers this Friday.

Hence, Wst30_m may also move along with the broader market’s reaction to the latest financial results out of the largest US bank.

Better-than-expected numbers out of JPMorgan may push Wst30_m to a fresh all-time high.

Here’s a comprehensive list of other key economic data and events due this week:

Monday, January 8

• EUR: Germany November factory orders; Eurozone November retail sales and December economic confidence
• USD: Speech by Atlanta Fed President Raphael Bostic

Tuesday, January 9

• JPY: Japan December Tokyo CPI
• AUD: Australia November retail sales
• EUR: Germany November industrial production; Eurozone November unemployment rate

Wednesday, January 10

• AUD: Australia November CPI
• Bitcoin: Deadline for SEC decision on Bitcoin ETF
• USD: Speech by New York Fed President John Williams
• Crude oil: EIA crude oil inventory report

Thursday, January 11

• AUD: Australia November external trade
• USD: US December CPI; weekly initial jobless claims

Friday, January 12

• CNH: China December CPI, PPI, and external trade
• GBP: UK November monthly GDP, industrial production, and trade balance
• SPX500_m: US earnings season kicks off
• USD: Speech by Minneapolis Fed President Neel Kashkari