SPX500 Cautious after Strong NFPs

SPX500 Analysis

The US Fed had made a dovish shift last month, hinting at peak rates and upgrading its own projections, which now imply at least three rate cuts this year ^[1]. However, policymakers have called for prolonged restrictive stance and have not closed the door to further tightening. They have made substantial progress on easing price pressures, but inflation remain well above the 2%.

Furthermore, the labor market is still strong, despite coming into better balance, a fact highlighted by last week's data and mainly Friday's robust report. The US economy added 216,000 jobs in December, in the biggest addition since September. Unemployment steadied at 3.7%, not far from its multi-decade lows, while wages growth picked up speed.

These figures cast some doubt over the prospects of a Fed pivot and SPX500 is subdued after last week's slide. It is exposed to the crucial EMA200 and the 23.8% Fibonacci of the last leg up (4,650-37) and breach could sent it to the 38.2% level, but deeper correction has a higher degree of difficulty.

Friday's NFPs may have cooled down a bit the market pricing for rate cuts by the Fed, but CME's FedWatch Tool still assign the highest probability for this process to start in March and send rates 150 basis points lower by the end of the year ^[2]. SPX500 is cautious, bit above the EMA200 the upside momentum is intact and has the ability to set new all-time highs (4,820).