S&P 500 Hits Another Record High, Fueled by Netflix and Microsoft Milestones; Global Markets Navigate Economic Signals and Central Bank Policies | Daily Market Analysis

Key events:

• Eurozone - Deposit Facility Rate (Jan)
• Eurozone - ECB Interest Rate Decision (Jan)
• USA - Core Durable Goods Orders (MoM) (Dec)
• USA - GDP (QoQ) (Q4)
• USA - Initial Jobless Claims
• USA - New Home Sales (Dec)

On Wednesday, the S&P 500 achieved yet another record high, driven by Netflix's exceptional quarterly results, leading to a nearly 12% surge and reaching a two-year peak. ASML's robust report also contributed to gains in chipmakers. This marked the S&P 500's third record high in four sessions, while the Nasdaq remained approximately 4% below its 2021 peak.

The S&P 500 was up 0.37% at 4,882.58 points, the Nasdaq gained 0.68% to 15,530.39 points, while the Dow Jones Industrial Average was up 0.01% at 37,909.55 points.

Netflix's impressive subscriber growth, coupled with initiatives like a password-sharing crackdown and a robust content slate, propelled its stock to new heights, instilling confidence in investors regarding its dominance in the streaming wars.

Microsoft attained a significant milestone by crossing the $3 trillion market value threshold for the first time, solidifying its position as the world's second most valuable company, closely trailing Apple. Throughout the year, Microsoft and Apple have been engaged in a competition for the title of the most capitalized stock on Wall Street. Microsoft's shares reached a record high of $405.63, a 1.7% increase, pushing its market capitalization beyond $3 trillion. Meanwhile, Apple's shares, trading at $194.82 after a 0.35% dip, maintained a market value of $3.01 trillion.

Yesterday's US economic data surpassed expectations, with both services and manufacturing PMIs demonstrating strength and suggesting the economy is not only in good shape but improving. While these are survey-based indicators and can be volatile, their significant uptick and positioning in growth territory offer promising signals for the economy. However, this may pose a slight concern for the Federal Reserve if it harbors worries about demand strength.

In Canada, the Bank of Canada opted to maintain interest rates during its January meeting and indicated a reluctance to consider rate cuts for now. This aligns with the broader stance of other central banks, reflecting a cautious approach until policymakers are more confident about avoiding potential backfire risks.

As a result, the Canadian Dollar faced depreciation on Wednesday, declining across the FX market. The BoC's reluctance to consider rate cuts is attributed to Canadian inflation not anticipated to reach the BoC's 2% target until 2025.

Money markets in Canada adjusted their bets of a BoC rate cut in April, dropping from 65% before the BoC's policy statement to 40%. BoC Governor Tiff Macklem emphasized the BoC's commitment to witnessing a decline in inflation before contemplating rate cut discussions during the subsequent press conference.

The DXY Index experienced downward pressure, approaching 103.05. However, potential losses for the USD may be limited by robust economic activity figures, prompting investors to postpone expectations of a rate cut. Thursday's release of Personal Consumption Expenditures figures will play a crucial role in determining short-term trends. Additionally, escalating tensions in the Red Sea could favor the Greenback in upcoming sessions.

EUR/USD surpassed the 1.0900 mark, reaching new multi-day highs, although the momentum faded towards the end of the North American session. The European Central Bank takes center stage on Thursday, with expectations for unchanged rates. President Lagarde may reinforce the case for a potential rate cut in the summer.

Gold has experienced volatility in recent sessions but has maintained a position above $2,000. This could indicate traders' confidence in the likelihood of central banks implementing rate cuts multiple times in the coming year.

However, uncertainties persist, and the resilience of gold above this level might be tested in the upcoming weeks if economic data diverges from the positive trend seen in the final months of the previous year.

Bitcoin is currently trading just below $40,000, testing this level as potential new resistance after breaking below it a few days ago. The recent drop was a significant psychological setback, and a swift recovery above this level could mitigate the damage. On the other hand, a failure to surpass this resistance might reinforce the initial bearish signal.