US Stocks Push Higher on AI Optimism – Dow up 1%
US equity markets extended their rally overnight, with all three major indices pushing higher and the Dow hitting a fresh record as technology stocks led the charge on renewed optimism around AI. The Dow Jones surged 0.99% to close at 49,642, while the S&P 500 added 0.62% to finish at 6,944, and the Nasdaq continued its advance, rising 0.65% to 23,547. The US dollar strengthened alongside Treasury yields, with the DXY climbing 0.34% to 98.60. Yields edged higher across the curve as markets reacted to developments surrounding Venezuela, with the 2-year yield up 1.3 basis points to 3.463% and the 10-year yield rising 1.2 basis points to 4.173%. In commodities, oil prices moved sharply lower as traders weighed the prospect of increased Venezuelan supply following recent US actions. Brent fell 1.96% to $60.55 per barrel, while WTI dropped 2.04% to $57.13. Gold continued to rise once again, up 1.02% to $4,494.83, as investors continued to seek exposure to safe-haven assets, keeping prices within striking distance of record highs.
Oil Remains in Focus for Traders
Oil has been one of the big movers in the first few days of the new year in light of the US strikes on Venezuela and the prosecution of Venezuelan President Nicolas Maduro. Both Brent and WTI prices spiked higher on the initial news of the escalation of US activity in Venezuela; however, the last few sessions have seen supply concerns that have been rising for the last few months start to weigh on ‘black gold’ again. WTI is now sitting just over 22% off its mid-2025 peak, and concerns that supply vastly outstripping demand in the coming year could see it break lower through the 2025 low at $54.98 and open up fresh downside ranges as we progress into the new year. Clearly, geopolitical updates both from Venezuela and other oil-producing regions, including Ukraine and the Middle East, will continue to exert influence on oil moves in the coming months; however, most traders feel that unless we see a dramatic change in the underlying fundamentals, we are in a sell-rallies environment for the foreseeable future. Short-term resistance now comes in just below $59, with stronger levels up at the 200-day moving average at $62.70, while support sits on the trendline at $56 and last year’s low.
Busy Calendar Day Ahead with First US Jobs Numbers of the Year
Looking ahead, it is a busy macroeconomic calendar that could inject further volatility into markets, particularly during the US session. In the Asian session, the early focus will be on Australian markets, with the latest CPI (exp +0.1% m/m and +3.6% y/y) due out, while the London session will see traders looking for moves in the euro on the back of more CPI data, with the EU headline expected to show a 2.0% y/y increase and the core number a 2.4% y/y increase. Traders will be closely watching the first US labour market data of the year, which could set the tone for expectations around Federal Reserve policy in the weeks ahead. The ADP Non-Farms number is expected at 49k, and the JOLTS Job Openings data is expected to come in at 7.61 mio. The US ISM Services PMI number is also scheduled during the day, with expectations for a 52.2 print, and Canadian Ivey PMI numbers (exp 49.5) will also be released.
