The S&P 500 Index is off to a strong start in its first full week of trading this year

Highlights:

• The Standard & Poor’s 500 jumped more than 1% on Monday, with the all-time high from two years ago at 4,818 beckoning.
• Core inflation is expected to fall in the December U.S. CPI on Thursday.
• JPMorgan, Bank of America, UnitedHealth Group and BlackRock are all reporting earnings this week.

The initial week of 2019 kicked off on a positive note for the S&P 500 as it gained 1.4% on Monday. The Nasdaq Composite also advanced 2%. Rising risk-on sentiment boosted investor sentiment.

Despite early losses, the Dow Jones Industrial Average managed to close up 0.6% as the market shrugged off Boeing’s concerns. The market is also looking forward to the fourth-quarter earnings reports from the major banks, which are due out on Friday.

The consumer price index for December is released on Thursday. This data will provide investors with further clues on the timing of the Fed’s interest rate reduction.

It’s likely that we haven’t seen the last of third-quarter earnings reports from public companies. The fourth-quarter results of these organizations will begin to emerge in 2024.

A slew of prominent financial institutions, healthcare behemoths, and banks will release their fourth-quarter results on Friday. Some of these include Wells Fargo, Bank of America, BlackRock, UnitedHealth Group, and JPMorgan Chase.

After last Friday’s employment report came in better than expected, investors are now more sheepish.

The strong employment market is good for stocks overall, but it’s not likely to cause inflation to drop so fast that the central bank can make quick cuts in interest rates.

This is the backdrop for Thursday’s CPI release. Economists expect core inflation to grow by 0.3% in December, while the annual rate is expected to fall to 3.8%.

In addition, the annual inflation rate is expected to rise to 3.2% from 3.1%. If core inflation continues to tick up, then stocks will take a hit.

Based on the Fed’s dovish stance in December, the market is likely to be driven higher by the continued decline in core inflation.

The market will also be supported by any data showing a drop in inflation. This will encourage investors to push for further rate cuts in 2024.

After beginning 2024 with a decline, the S&P 500 index has started to find its footing and is likely to attempt a new record high before the month ends. The previous record was set on January 4, 2022, which is currently 4,818. Even if the market’s rally from December and November is over, this could still be achieved, as the 20-day and 9-day Simple Moving Averages are currently moving in tandem.

If the short-term moving average crosses below the 21-day simple moving average, then the market is in a short-term decline. However, the market is still expected to rise in the early part of the week due to the upcoming CPI print and earnings. The relative strength index is also no longer in an over-bought territory.