S&P 500; US Indexes Fundamental Weekly Forecast – Busy Week with Trump, Earnings, Fed, Jobs Data on Tap

The major U.S. stock indexes rallied to fresh record highs last week, driven by stronger-than-expected earnings reports from a number of major companies. In addition to stellar fourth-quarter results, many companies provided bullish guidance for 2018 as a result of improving global economic growth and recently passed tax reform.

All major S&P sectors advanced on the week. The strongest sector was telecom. The weakest the industrials.

In the cash market, the benchmark S&P 500 Index settled at 2872.87, up 2.2%. Year-to-date, it is up 7.7%. The blue chip Dow Jones Industrial Average closed at 26616.71, up 2.1%. In 2018, it’s up 7.5%. The tech-based NASDAQ Composite finished at 7498.49, up 2.3%. It is 8.7% higher this year.

There wasn’t much economic news last week. Investors may have been influenced by a steep drop in the U.S. Dollar which fueled a strong rallies in commodities like crude oil. This was supportive for the energy sector.

Major economic data was limited to the GDP and Durable Goods reports.

U.S. fourth-quarter gross domestic product increased at a 2.6 percent annual rate, held back by a modest pace of inventory accumulation. Economists were looking for a 3 percent increase.

Core Durable Goods Orders came in at 0.6%, beating the 0.5% estimate. The previous month was revised upward to 0.3%. Durable Goods Orders rose 2.9%, well above the 0.9% forecast. The previous month was revised upward to 1.7%.

At the World Economic Forum at Davos, Switzerland, President Trump promoted the American economy while urging international businesses to invest after what he calls a “resurgence.”

In warning countries against trying to “exploit” other nations through trade, he reiterated that he would look out for “America first.” However, he aimed to reassure the global leaders that “America first does not mean America alone,” and said a strong American economy would lift other countries.

The globe is “witnessing the resurgence of a strong and prosperous America,” he said.

Trump further added, “Now is the perfect time to bring your business, your jobs and your investments to the United States.”

The President went on to further say that “The United States will no longer turn a blind eye to unfair trade practices.” Additionally, “We cannot have free and open trade if some countries exploit the system at the expense of others.”

Finally, Trump said when the U.S. economy grows, “so does the world.” He also said that countries worrying about their citizens first helps them take care of the needs of the “forgotten.”

Investors seemed to like the message Trump was delivering because the major indexes finished sharply higher on Friday.

Forecast

Earnings, revenue and President Trump’s State of the Union address will be at the forefront this week. Additionally, investors will also be following the Federal Reserve while interpreting U.S. employment data.

President Trump will deliver his State of the Union speech on Tuesday, January 30 at 9:00 Eastern (0200 GMT Wednesday). Traders should expect Trump to talk about the positives in the economy.

The Fed will issue its monetary policy statement on January 31. The central bank is not expected to raise interest rates. Traders will be looking for the Fed’s assessment of the economy, inflation and its outlook for future rate hikes.

Finally, investors will also get the opportunity to react to the latest data on employment in Friday’s U.S. Non-Farm Payrolls report. The headline number is expected to show the economy added 184K jobs in January, up from 148K in December. Average Hourly Earnings are expected to increase 0.3% and the Unemployment Rate is expected to remain at 4.1%.