"At present, the fundamental backdrop remains fairly favourable as the U.S. labour market has cooled, helping yields and the U.S. dollar ease, thereby partially relieving discount pressure on equity valuations, especially for interest-rate-sensitive groups. However, part of the rate-cut expectations has already been priced in, so the index's positive reaction tends to be selective and depends heavily on upcoming data as well as the message at the FOMC meeting."
"This week, the CPI and PPI reports will be the focus of attention. A "soft" set of numbers would reinforce the story of the Fed easing soon, pulling real yields down further and supporting risk appetite. Conversely, if inflation heats up due to rising energy prices or shipping costs, the yield curve may be inverted, negatively affecting equities. Market expectations are leaning toward a scenario of cooling inflation accompanied by slower economic growth to continue bolstering rate-cut expectations."
"The earnings story will determine whether the S&P 500's rally is sustainable. The current focus is on AI and spending on digital infrastructure (semiconductor chips, networking equipment, software, cloud services). The market now wants to see real results instead of potential narratives: rising revenue, healthy profit margins, and positive free cash flow ... Major product launch events from tech companies and the upcoming earnings season of the software-data-semiconductor group are what the market is waiting for because they provide partial signals for the index's next trend."
The S&P 500 remains close to its all-time high near 6,530 points. Outlook centers on three pillars: inflation and the pace of Fed easing, corporate earnings health, and capital flows driven by investor sentiment. The U.S. labour market cooling has eased yields and the dollar, reducing valuation discount pressure, particularly for interest-rate-sensitive sectors. Part of rate-cut expectations is already priced in, making market reactions selective and data-dependent. Upcoming CPI and PPI prints and the FOMC message will be pivotal. Earnings focus is on AI and digital infrastructure, with the market seeking tangible revenue, margins, and free cash flow. Falling yields typically encourage renewed flows into risk assets.
Read at London Business News | Londonlovesbusiness.com
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