S&P 500; US Indexes Fundamental Forecast – January 30, 2017

The major U.S. equity indexes closed mixed on Friday as investors used the weaker-than-expected fourth-quarter GDP report as an excuse to book profits after a steep rally and ahead of the week-end. Nonetheless, the indexes were still able to hold onto their nearly 1 percent weekly gains.

In the cash market, the blue chip Dow Jones Industrial Average remained above 20,000, closing at 20093.78, down 7.13 or -0.04%. The benchmark S&P 500 Index settled at 2294.69, down 1.99 or -0.99% and the tech-based NASDAQ Composite came in at 5659.61, up 4.33 or +0.08%.

The Dow was weighed down by Chevron and Goldman Sachs. Chevron fell in reaction to disappointing quarterly earnings. However, the energy sector was down because of weaker oil prices. They helped drive down oil stocks which had a major influence on the S&P 500 Index.

Gross domestic product increased 1.9 percent on an annualized basis during the first estimate of fourth quarter GDP. This was below the 2.1 estimate and a sharp decrease from the previous quarter’s read of 3.5 percent growth. Durable goods declined 0.4%. Consumer sentiment for January hit 98.5, above the 98.1 estimate.

The GDP report shows the economy is stuck in a growth range. It could have an effect on the frequency of Fed rate hikes. We’ll know more about its influence when the Fed releases its monetary policy statement on Wednesday, February 1.

Forecast

Early price action in Asia suggest that U.S. stocks could be under pressure on Monday due to backlash caused by President Trump’s immigration policy. Investors may use this geopolitical uncertainty as an excuse to pare positions. Traders may use this news as an excuse to increase volatility that had fallen to extremely low complacency levels.

We could also start to see profit-taking and some light speculative shorting ahead of the FOMC statement on Wednesday and Friday’s U.S. Non-Farm Payrolls report.

Today, investors will get the opportunity to react to the latest Core PCE Price Index and Personal Spending. These two reports are followed closely by the U.S. Federal Reserve.

Minor reports include Personal Income, Pending Home Sales and a Loan Officer Survey.

Lower stock markets in Asia suggest today may be a risk off day due to the geopolitical risks surrounding the changes in U.S. immigration policy. Protests are expected to escalate in major cities in the U.S. which could cause business disruptions particularly at airports.