SPX Spotlight - Friday, Jan 3, 2025: Tech Giants Propel S&P 500 to Strong Start
3rd day of 2025 and index snapped a four-day losing streak. Is the momentum sustainable?
Introduction
The S&P 500 kicked off 2025 with a bang, surging 1.3% to close at 5,942.47 on Friday, January 3rd. This rally, led by tech heavyweights, snapped a four-day losing streak and marked the index's best performance in nearly two months.
Market Drivers and Economic Reports
Market Sentiment
Tech Sector Rally: Investors took advantage of recent pullbacks in technology stocks, with companies like Nvidia (+4.5%) and Super Micro Computer (+10.9%) posting significant gains.
AI-Related Stocks: The renewed interest in AI-related companies suggests a shift back towards growth-oriented investments.
Electric Vehicle Sector: Tesla jumped 8.2%, bouncing back from its previous day's tumble, while Rivian soared 24.5% after beating delivery expectations.
Economic Reports
Manufacturing Sector Improvement: The ISM Manufacturing PMI rose to 49.3 in December 2024, up from 48.4 in November, beating market expectations of 48.4. While still in contraction territory, this improvement suggests the manufacturing sector is moving closer to expansion.
New Orders Rebound: The New Orders Index jumped to 52.5, its highest level since January, indicating a potential uptick in future production.
Federal Reserve Commentary
Richmond Fed President Tom Barkin expressed confidence in the current monetary policy:
Inflation Outlook: Barkin believes the current interest rate level remains restrictive enough to lower inflation in 2025.
Economic Assessment: He noted that strong spending, consumer pushback on high prices, and higher productivity have "landed the economy in a good place".
Geopolitical Factors
U.S. Steel Deal Block: President Joe Biden's decision to block Nippon Steel's acquisition of U.S. Steel impacted the market, with U.S. Steel's stock falling 6.5%.
Technical Analysis
Recap
SPX gapped in the morning as sliced right through pivotal level. Friday was a strong close right at our first resistance level as discussed in our earlier post.
Bull/Bear Case
We are resting at close to pivotal level of 5,930. Lucky, the 200 EMA light blue ribbon collides with the first resistance level at 5,965 and the market may test that.
There is also a possibility that we may gap up to the 5,965 level and consolidate back to pivot level.
On the other side, the closing two candles shows rejection from the pink EMA ribbon. A pullback could be healthy for a further push in the market and also add structure to the chart.
Market Sentiment and Key Indicators
Last two trading sessions, we broke out of the channel. Although it looked like a false breakout with VIX trying to retrace back into the channel, it lost the heat and was trending down for the entire Friday session.
The next support level to look for is at 15.93. VIX may not easily give up this level as it has acted as strong support and resistance previously. If VIX bounces from this level, we can expect a pullback on the market.
If VIX gives up 15.93 level, markets may trend higher.
Key Takeaways & What’s Next
Close eye on VIX level. Probability of market trending up is low.
Biden cancels Nippon and US Steel deal, on concerns about national security.
S&P Global Composite PMI report at 8:45AM CST.
S&P Global Services PMI report at 8:45AM CST.
3-Year Note auction rates at Noon CST.
NVIDIA CEO Jensen delivering keynote at CES 2025.
Closing Thoughts
Jensen’s keynote at CES will be a huge catalyst for semiconductor stocks boosting the market up. Which tech companies will pull out their ace cards? Comment below.