Dow Jones Industrial Average (DJIA)

• U.S. stocks posted weekly gains of 2% to 4%, driven by Wednesday and Friday rallies. The DJIA, now less than 3% below its December 4 record high, logged just its second positive week in six weeks. Bond yields retreated, with the 10-year Treasury yield closing at 4.61%, down from 4.77% last week. Strong results from major U.S. banks surpassed expectations, with 4QCY24 earnings more than doubling year-over-year. S&P 500 financial sector earnings were forecast to grow nearly 40%, the strongest among all sectors, according to FactSet. The CPI report showed core inflation rising 3.2% annually in December, slightly below expectations, boosting market sentiment. Meanwhile, China's economy grew 5.4% in the 4QCY24, exceeding estimates, with full-year growth aligning with its 5.0% target.
• Looking ahead, with a light economic calendar, market attention is expected to focus on 4Q earnings reports and potential policy announcements, including tariffs, which could impact bond yields and investor sentiment. Reports suggest President- elect Donald Trump is preparing to sign over 100 executive orders starting on his first day in office. Despite these uncertainties, the post-election rally - driven by expectations of corporate-friendly policies such as tax cuts, deregulation, and pro-growth initiatives - continues to underpin market optimism. A ceasefire deal between Israel and Hamas in the Gaza Strip took effect on Sunday after a nearly three-hour delay also likely to impact sentiment.
• Technically, The DJIA has rebounded from its 13-week SMA, closing decisively above its 5-week SMA, suggesting that the short-term uptrend remains intact. Weekly stochastic and RSI indicators point to further recovery, but caution is warranted as the SmartMCDX index nears the 15 threshold, historically associated with sell-offs.
• In short, market volatility is expected to remain elevated in this shortened trading week, with downside bias, driven by Trump's potential policy announcements. Key support levels are at 42,350 (13-week SMA) and 41,211 (23.6% Fibonacci retracement), while resistance levels are at 43,537 and 45,073.

Source: Kenanga Research - 20 Jan 2025