The benchmark index for US stocks is having a restrained start to the new year so far. Tuesday’s declines of 0.4% were offset by Wednesday’s 0.75% advance at the close.
Yesterday’s gains reached as much as 1.28%, if it weren’t for the pullback following the release of the FOMC minutes.
The minutes from that December Fed meeting showed that policymakers remained focused on subduing rising consumer prices, and were also concerned about any "misperception" in financial markets about their commitment to fighting inflation.
In other words, the Fed wants to be seen as still intent on raising US interest rates further, in contrast to markets expectations for a Fed rate cut before the end of 2023.
Fears over a still-hawkish Fed promptly dampened some of the gains in the S&P 500, with today’s price action still muted at the time of writing.
Friday’s NFP could trigger next big move for S&P 500
Markets will be interpreting tomorrow’s US data release in terms of whether the labour market is strong enough to keep withstanding higher US interest rates.
As things stand, markets are forecasting 200k new jobs in December, an unemployment rate that remained at 3.7%, and an average hourly earnings growth of 0.4% relative to November.
Based on the forecasted figures above, here are two potential outcomes that could move US stocks before the weekend:
S&P 500 awaits catalyst for breakout
Looking at the charts, the S&P 500 has been consolidating around these upper-3000 levels since mid-December, awaiting a fresh catalyst to spark a major move either upwards or downwards.
This consolidation in prices indicates the uncertainty that market participants have as to how much higher the Fed can continue hiking.
That uncertainty could be dispelled this Friday, in light of the incoming NFP print.
From a technical perspective: