As we enter into the last market week of January, investors will have lots to focus on in the week ahead with a series of major U.S. companies including Apple ($AAPL), Microsoft ($MSFT), Facebook ($FB), and Tesla ($TSLA) all reporting earnings. The Federal Reserve is to meet, and markets will get their first look at fresh GDP growth figures in the final quarter of pandemic ravaged 2020. Elsewhere, the IMF is set to release its World Economic Outlook and growth figures from Germany, Mexico and Hong Kong will also be in the spotlight.
Here’s what you need to know to start your week.
S&P500 (US Market)
The benchmark index ($SPX) recovered from the earlier week of losses, posting a weekly gain of +2.23%. The rebound have reaffirm the significance of 20DMA supporting the rally since 4th November 2020. The significance of 20DMA towards $SPX daily current price action is also observed in the various rebound highlighted in the chart (arrow), particularly thrice in December 2020 and once in January 2021.
As $SPX continues to creep up with a higher high at every bi-weekly swing, it is observed that volume is diminishing at every of this top establishment – essentially plotting out a technical bearish divergence between price rally with volume decline.
At the current junction, the $SPX remains firmly within the congested 3 months trend channel. The immediate support to watch for any further weaknesses is at 3,660 level. This level would see $SPX breaking down the highlighted trend channel convincingly, along with the first break of a minor classical support established on the opening week of 2021.
1. Earnings heat up
After leading markets higher for most of 2020, tech stocks took a backseat late last year amid a rotation into value stocks which were boosted by hopes for the economic recovery promised by vaccines.
That shift has stalled in recent days as investors weighed lackluster outlooks from big banks and a blockbuster quarterly report from Netflix ($NFLX) that saw shares climb 17%.
Microsoft ($MSFT) reports after the close on Tuesday, followed by Apple ($AAPL), Facebook ($FB) and Tesla ($TSLA), which recently joined the S&P 500, a day later.
The results could push the combined market cap of the FAANGs – Facebook, Amazon ($AMZN), Apple, Netflix and Google-parent Alphabet ($GOOGL)- back above their all-time peak of $6.16 trillion.
2. Fed meeting
Fed policymakers will hold their first meeting since Democrats last week took control of the Senate, which has increased the likelihood that new President Joe Biden’s proposed $1.9 trillion stimulus package could be passed.
The Fed is not expected to make any policy changes at the conclusion of its two-day policy meeting on Wednesday and is likely to reiterate that the economy is still far from its goals of full employment and 2% inflation.
There is some speculation among investors that increased government spending to boost the recovery could prompt the Fed to begin tapering its massive bond-buying program as soon as the end of this year.
But Fed Chair Jerome Powell said earlier this month that “now is not the time to be talking about exit.”
3. U.S. GDP data
Market participants will get their first look at how the U.S. economy performed in the fourth quarter from Thursday’s figures on gross domestic product after already weaker consumer spending numbers and falling employment in December.
After a record 33.4% annualized rate of growth in the third quarter, economists are forecasting growth of 4.0% in the final three months of the year. The economy is expected to have contracted by 3.5% for the full year.
The economic calendar also features data on durable goods orders on Wednesday, initial jobless claims numbers on Thursday and personal income and spending data on Friday.
