S&P 500 Eyes New Highs: Industrial, Energy Stocks to Fuel Gains Amid Tech Wobble?

 | Mar 14, 2024 18:41

  • Despite a slightly weaker close on Wednesday, the SPY, tracking the S&P 500, may surge to a new record high today.

  • Recent spikes in copper, gold, and WTI crude oil prices have spurred a rally in energy stocks and miners, bolstering market sentiment.

  • Traders await key US economic data today, including PPI and retail sales figures amid expectations of continued bullish momentum in the SPY.

    • The SPY, which is designed to track the S&P 500 stock market index, could be heading to a new record high today despite a slightly weaker close on Wednesday.

    While the tech sector (NYSE:XLK) rally has weakened in recent days, other sectors such as industrials (NYSE:XLI), energy (NYSE:XLE), and financials (NYSE:XLF) have started to outperform.

    We have seen a big rise in copper and gold prices of late, while WTI crude oil has surpassed the $80 level. Rising commodity prices have helped to fuel a rally in energy stocks and miners.

    Stocks remain buoyant despite the release of slightly hotter-than-expected US inflation data earlier this week, which failed to dampen expectations of a rate cut from the Federal Reserve in the coming months.

    h2 Why have commodity prices rallied?/h2

    In short, because there’s optimism about a Chinese demand recovery. We have seen metal prices like copper and silver break out this week, with the former rising above $4.00 and the latter hitting $25 per ounce. WTI crude oil has hit $80 per barrel today.

    In so far as copper is concerned, its gains coincided with a report of an agreement being reached among some Chinese smelters to cut production due to a collapse in processing fees, raising fears about a shortage of refined metal.

    Chinese smelters, which are the leading global producers and consumers of refined copper, are encountering financial difficulties due to declining fees for converting copper concentrate into metal. This situation raises the possibility of production cuts, which could result in a supply shortage.

    h2 What are US traders watching today?/h2

    Later today, we will have the latest US producer price inflation and retail sales data, as well as the usual weekly jobless claims figures.

    In January, the US Producer Price Index (PPI) and Consumer Price Index (CPI) demonstrated unexpected strength, prompting speculation that a similar scenario might unfold following the recent release of February's CPI report, which also indicated sustained robustness. It is expected that retail sales will rise by 0.8% in February, following a decrease in spending caused by severe weather conditions in January.

    Retail sales data may well impact retail stocks in the direction of surprise. PPI data has the potential to impact Fed rate cut expectations, although judging by the reaction of CPI data, a slightly stronger print may only cause a temporary pullback in risk assets.

    h2 SPY technical analysis and trade ideas/h2
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    We can argue that the markets are extremely overbought and whatnot, but ultimately it is price action that counts and so far, there are no indications of a top. Indeed, as the SPY remains comfortably above the 21-day exponential moving average and a bullish trend line, dip-buying is the trade that continues to work well in these conditions.