U.S. Consumers Kick Off 2025 on Solid Footing. What to Watch Now. — Barrons.com

ASE increased to a 22-month high of 2629.00 Index Points.

Over the past 4 weeks, Amman Stock Exchange General Index gained 7.87%, and in the last 12 months, it increased 6.6%.

Considering technical factors, Sudeep Shah of SBI Securities believes Hindalco Industries is likely to witness a sharp upside rally in the next couple of trading sessions.

Further, he believes Manappuram Finance is also likely to see the new leg of the rally, as the stock has given a Falling Channel breakout on a daily scale. "This breakout is confirmed by robust volume. Currently, the stock is trading above its short and long-term moving averages," he reasoned.

Additionally, this head of technical and derivative research at SBI Securities picks two stock ideas for next week - Bharat Dynamics and Swaraj Engines. "Bharat Dynamics has given a consolidation breakout on a daily scale, which confirmed by robust volume, while Swaraj Engines has given a downward sloping trendline breakout on a daily scale, which was confirmed by above 50-day average volume," he said.

Do you believe the Nifty is likely to break 23,000 next week and form bottom?

Last week, the markets experienced significant volatility as in almost all the sessions, we saw either a gap-up or a gap-down opening. As the index opened with gaps, it kept little trading room for the traders. The index has formed a small body candle in the last four trading sessions. Further, on a weekly scale, the index has formed a Doji candlestick pattern, which shows indecisiveness among the market participants.

During the week, the index has witnessed a pullback rally for three consecutive trading sessions, and thereafter, it has resumed its southward journey. Most noteworthy, during this pullback period, the daily RSI (Relative Strength Index) failed to cross the 40 mark, which is a bearish sign as per RSI range shift theory.

Going ahead, traders should remain cautious as the persistent gap openings and indecisiveness on the charts highlight the possibility of continued volatility.

Talking about crucial levels, the zone of 23,050-23,000 will act as a crucial support for the index. If the index slips below the level of 23,000, then we may witness a sharp correction upto the level of 22,700, followed by 22,500 level in the short term. While, on the upside, the zone of 23,450-23,500 will act as a crucial hurdle for the index as the 38.2 percent Fibonacci retracement level of its prior correction (24,226-23,047) is placed in that region.

Do you see the Bank Nifty breaking 100-week EMA before getting stability?

The Bank Nifty has taken a support near 20-month EMA (Exponential Moving Average) and thereafter witnessed a minor pullback. The pullback is halted near the 10-day EMA level, and it has resumed its southward journey. This resulted in the formation of a high wave candle on a weekly scale, which indicates indecisiveness among the participants.

Most noteworthy, during this pullback rally, the daily RSI failed to cross 40 mark, which is a bearish sign as per RSI range shift rules. Going ahead, the zone of 47,900-47,800 will act as immediate support for the index. If the index slips below the level of 47,800, then the index is likely to test the level of 47,000 in the short term. On the upside, the zone of 49,400-49,500 will act as a crucial hurdle for the index.

Do you see a new leg of rally in Manappuram Finance, which rallied sharply last week?

Yes, the stock has given a Falling Channel breakout on a daily scale. This breakout is confirmed by robust volume. Currently, the stock is trading above its short and long-term moving averages. These averages are edging higher, which is a bullish sign. The daily RSI is surged above 60 mark and it is in a rising mode. Hence, we believe the stock is likely to see the new leg of the rally in the stock.

Do you expect the upward journey to begin in CG Power and Industrial Solutions and Siemens considering the Hammer formation on the weekly charts?

Yes, both the stocks have formed a Bullish Hammer candlestick pattern on a weekly scale. Most noteworthy, the volume activity is above average, which indicates accumulation at lower levels. The momentum indicators and oscillators have also suggested a limited downside for now. Hence, we believe the stock of CG Power and Siemens are likely to begin their upward journey.

What are your top 2 bets for next week?

Bharat Dynamics

The stock has given a consolidation breakout on a daily scale. This breakout is confirmed by robust volume. In addition, the stock has formed a sizeable bullish candle on a breakout day, which adds strength to the breakout. The momentum indicators and oscillators are also suggesting strong bullish momentum in the stock. Hence, we recommend accumulating the stock in the zone of Rs 1,280-1,270 level with the stop-loss of Rs 1,240 level. On the upside, it is likely to test the level of Rs 1,350, followed by Rs 1,400 in the short term.

Swaraj Engines

The stock has given a downward sloping trendline breakout on a daily scale. This breakout is confirmed by above 50-day average volume. The daily RSI has given a neckline breakout of Adam & Adam Double Bottom pattern, which suggests strong bullish momentum. Hence, we recommend accumulating the stock in the zone of Rs 3,230-3,200 level with the stop-loss of Rs 3,120 level. On the upside, it is likely to test the level of Rs 3,380, followed by Rs 3,450 in the short term.

Do you see a sharp rally in Hindalco as the stock defended mid line of Bollinger bands on monthly charts and climbed above the same line on the daily charts?

On a weekly scale, the stock has formed a Gravestone Doji candlestick pattern in the month of September 2024 and thereafter witnessed correction. The correction was halted near the 100-week EMA level and witnessed a sharp rebound. Most noteworthy, the stock has formed a Bullish Engulfing candlestick pattern on a weekly scale, which is a bullish sign. Further, the stock is surged above its 20-day EMA level for the first time after December 2024. The daily RSI has given a horizontal trendline breakout.

Hence, considering these technical factors, we believe the stock is likely to witness a sharp upside rally in the next couple of trading sessions.Disclaimer: The views and investment tips expressed by experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.

By Megan Leonhardt

The appalling scale of the vast and still growing Los Angeles wildfires puts the blazes out of the ordinary in terms of the economic harm they will bring.

While fires typically aren't as economically damaging as Atlantic hurricanes that make landfall in the U.S., the duration of the fires, and the fact that they are burning the country's second-biggest city, signal that this natural disaster is likely to rank with the recent Hurricane Milton and even Helene.

Economists expect employment setbacks, impacts on inflation and home-building, the potential for sustained swings in consumption, and even a discernible drag on national economic growth.

"The wildfires in the Los Angeles area have caused tragic loss of life and widespread destruction of property and could eventually have some implications on high-frequency economic data," says Ryan Sweet, chief U.S. economist at Oxford Economics.

Under the best-case scenario, the overall physical damage and hit to economic activity is likely to be between $2 billion and $3 billion, says Adam Kamins, senior director at Moody's Analytics. But the potential for worse effects is significant.

Economic Growth

Inflation-adjusted gross domestic product growth isn't constructed to directly capture the economic costs of natural disasters such as property damage — it measures current production of goods and services. But it can indirectly pick up on shocks to the system, and in this case, that is likely to occur.

The Los Angeles wildfires could subtract 0.1 to 0.3 percentage points from annualized GDP growth in the first quarter, estimates Andrew Husby, senior U.S. economist at BNP Paribas Securities. He's expecting first quarter GDP growth to measure 1.9%, down from the 3.1% annualized quarterly growth recorded in the third quarter. The initial estimate of fourth-quarter GDP is due out Jan. 30.

The hit to economic growth, in some respects, is likely to come from lower output and consumption in the immediate wake of the fires. Restaurant dining in greater Los Angeles has taken a hit and power outages have plagued the area. The loss of major events, such as an NFL playoff game that was relocated from the city to Arizona, will likely add to the drag on state economic activity.

The damage to homes and infrastructure also will weigh on productivity and output, Kamins says. Estimates of insured property losses are around $30 billion so far, but uninsured losses could "easily" double that total, Husby says. That would make the recent fires the costliest in U.S. history, putting them among the top 10 overall natural disasters in American history.

Cleanup and rebuilding will start quickly once the fires are under control, which could help boost economic activity, but the process could take years, Husby said. That is especially true given the vast number of under- or uninsured properties, not to mention California's vulnerable insurance infrastructure.

"Ultimately, the price tag could start to look like something associated with major hurricanes, which tend to be far more disruptive from an economic standpoint due to their far larger scale," Kamins said.

Employment

Analyzing the 13 major California wildfires that took place over approximately the past three decades, Morgan Stanley economists estimate that more destructive fires usually had an effect on employment, but not always. Across all wildfires analyzed, the median payroll shortfall was only 3,000 workers, but it was 23,000 in the cases of larger wildfires.

Given the size and duration of the current wildfires, Morgan Stanley estimates payrolls in California will be down 20,000 to 40,000 in January.

On a national scale, Husby estimates the Los Angeles wildfires will have a negative effect of 14,000 to 27,000 positions on January nonfarm payrolls. His call could have been higher, but workers will be counted as employed by the BLS if they have received pay for the week of Jan. 12-18. That means workers who are paid biweekly or semimonthly would likely still have received some pay for hours worked during that period and would therefore be counted as employed.

The impact of the wildfires could be more apparent in hours worked, Sweet said. "To reduce employment, employees have to be off work without pay for the entire pay period," he said. "The wildfires' impact will likely be more visible in the household survey via the number of people not at work because of weather-related events."

Husby also expects to see a jump in the number of Americans filing for unemployment benefits. While wildfires typically don't result in a jump in initial jobless claims, Los Angeles' high population density and displacement of more than 100,000 people so far will likely result in an additional 5,000 initial claims in California for the week of Jan. 16, he said.

Inflation

The wildfires could worsen inflationary pressures as well. Core inflation, which excludes food and energy costs, is expected to accelerate by four to nine basis points, or hundredths of a percentage point, month over month post-wildfires, forecasts Morgan Stanley. Higher vehicle prices are mainly responsible.

The core measure of the consumer price index was 3.2% in December, the BLS reported on Wednesday. The index for used cars and trucks rose 1.2% month over month in December, while the gain for new vehicles was 0.5%.

Following the 2018 Camp fire that destroyed more than 18,800 structures and the slightly less damaging 2017 Tubbs fire, which both took place in Northern California, core inflation rose an average of nine basis points, researchers found. The shock was most pronounced for core goods prices, particularly on used and new cars.

Morgan Stanley economists expect that scenario to be repeated as a result of the Los Angeles fires.

Previous fires didn't have a meaningful, immediate effect on rent prices, which is good news for stubborn shelter inflation. But that doesn't mean that the rents won't react this time. Still, the impact will likely come with a lag of even six to nine months, says Diego Anzoategui, economist at Morgan Stanley Research.

Beyond inflation, there will likely be some downward pressure on home starts. Retail sales could also see a drag of about 15 basis points, on average, for two months of so-called control retail sales, a data series that excludes certain volatile categories. But the series is so noisy that we take that result with a "grain of salt," Anzoategui said.

Interest rates

Despite all that, the disaster isn't likely to change national conditions enough that it would significantly affect the Federal Reserve's decisions about interest rates.

Investors should expect policymakers to acknowledge the human toll of the disaster, but look through the potential short-term swings in the economic data. "The long-term effects on the Fed's mandated goals — employment and prices — are likely to be small," Husby said.

Write to Megan Leonhardt at megan.leonhardt@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

To the Editor: In " The Stock Market's New Year Is Off to a Tough Start. What Lies Ahead, According to Our Roundtable Pros" (Jan. 10), Sonal Desai agrees with Henry Ellenbogen that "if we can get the tax cuts funded, plus deregulation, it would be fantastic for the country." But which part of the country will it be fantastic for? The elite 10% who own 93% of all equities, or the less fortunate 50% who own just 1%? Scott Black makes this point by noting, "The bottom one-third of U.S. households has zero savings, and more than two-thirds of Americans are living paycheck to paycheck." I think we all know that the spoils will go to the rich, but others cast their votes expecting a piece of the pie, as well.

James S. Vickers San Jose, Calif.

Humble Pie

To the Editor: Excluding Sonal Desai and her bond picks, there are 10 stock experts listed along with their results for 2024 (" 2024 Barron's Roundtable Report Card," Jan. 10). Giving equal weight to their picks for last year, I came up with an average performance of 11.2%, versus the S&P 500 index's total return of 26.8% during the listed period. Only Henry Ellenbogen, Rajiv Jain, and Meryl Witmer outperformed the S&P 500, while two experts had negative returns. It should make investment pros both humble and skeptical of the ability of most "experts" to consistently outperform the averages over any length of time.

Arthur C. Hodges Boston

A 10-Foot Pole

To the Editor: How will insurance companies protect against 200,000-plus people living in tents that need to cook a warm meal at night, so they don't freeze to death? (" California Fires Have Caused Billions of Dollars in Losses. Why Insurance Stocks Have a Brighter Future," Jan. 9.)

Campfires cause hundreds of brush fires every year in California. Insurance companies are liable for that risk. Sure, they can stiff the policyholders as they have been doing for years, but eventually the people will catch on and stop paying, or worse.

I wouldn't touch an insurance stock with a 10-foot pole, but it's your money, and that's what makes investing interesting.

Dan Laramie On Barrons.com

Toil and Trouble

To the Editor: It's ridiculous to say the Federal Reserve is "data dependent" when in fact it's eye-of-newt and tail-of-salamander dependent (" Rate Cuts Recede as a Strong Jobs Report Bolsters Fed Uncertainties," The Economy, Jan. 10).

There was zero reason for the first 0.5% interest-rate cut and no reason for the next cut, either. The Fed and its Ph.D. economists are living in some alternate universe.

Robert Ray On Barrons.com

Send letters to: mail@barrons.com. To be considered for publication, correspondence must bear the writer's name, address, and phone number. Letters are subject to editing.

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

Investor Sentiment Readings

High bullish readings in the Consensus stock index or in the Market Vane stock index usually are signs of Market tops; low ones, market bottoms.

 
                              Last Week  2 Weeks Ago  3 Weeks Ago 
Consensus Index 
Consensus Bullish Sentiment   58%        63%          65% 
AAII Index 
Bullish                       25.4%      34.7%        35.4% 
Bearish                       40.6       37.4         34.2 
Neutral                       34.0       28.0         30.4 
Market Vane 
Bullish Consensus             67%        69%          70% 
TIM Group Market Sentiment 
Indicator                     51.8%      46.2%        38.8% 
Sources: Consensus Inc.; American Association of 
Individual Investors; Market Vane; TIM Group 
 
 

To subscribe to Barron's, visit http://www.barrons.com/subscribe

To the Editor:

In " The Stock Market's New Year Is Off to a Tough Start. What Lies Ahead, According to Our Roundtable Pros" (Jan. 10), Sonal Desai agrees with Henry Ellenbogen that "if we can get the tax cuts funded, plus deregulation, it would be fantastic for the country." But which part of the country will it be fantastic for? The elite 10% who own 93% of all equities, or the less fortunate 50% who own just 1%? Scott Black makes this point by noting, "The bottom one-third of U.S. households has zero savings, and more than two-thirds of Americans are living paycheck to paycheck." I think we all know that the spoils will go to the rich, but others cast their votes expecting a piece of the pie, as well.

James S. Vickers

San Jose, Calif.

Humble Pie

To the Editor:

Excluding Sonal Desai and her bond picks, there are 10 stock experts listed along with their results for 2024 (" 2024 Barron's Roundtable Report Card," Jan. 10). Giving equal weight to their picks for last year, I came up with an average performance of 11.2%, versus the S&P 500 index's total return of 26.8% during the listed period. Only Henry Ellenbogen, Rajiv Jain, and Meryl Witmer outperformed the S&P 500, while two experts had negative returns. It should make investment pros both humble and skeptical of the ability of most "experts" to consistently outperform the averages over any length of time.

Arthur C. Hodges

Boston

A 10-Foot Pole

To the Editor:

How will insurance companies protect against 200,000-plus people living in tents that need to cook a warm meal at night, so they don't freeze to death? (" California Fires Have Caused Billions of Dollars in Losses. Why Insurance Stocks Have a Brighter Future," Jan. 9.)

Campfires cause hundreds of brush fires every year in California. Insurance companies are liable for that risk. Sure, they can stiff the policyholders as they have been doing for years, but eventually the people will catch on and stop paying, or worse.

I wouldn't touch an insurance stock with a 10-foot pole, but it's your money, and that's what makes investing interesting.

Dan Laramie

On Barrons.com

Toil and Trouble

To the Editor:

It's ridiculous to say the Federal Reserve is "data dependent" when in fact it's eye-of-newt and tail-of-salamander dependent (" Rate Cuts Recede as a Strong Jobs Report Bolsters Fed Uncertainties," The Economy, Jan. 10).

There was zero reason for the first 0.5% interest-rate cut and no reason for the next cut, either. The Fed and its Ph.D. economists are living in some alternate universe.

Robert Ray

On Barrons.com

To subscribe to Barron's, visit http://www.barrons.com/subscribe