Fed review in spotlight as market looks for leads

Philippine stocks may trade sideways in the coming days after ending a seven-week winning run as investors look ahead to the policy meeting of the US Federal Reserve.

On Friday, the benchmark Philippine Stock Exchange index (PSEi) dropped by 2.09% or 145.64 points to close at 6,822.32, while the broader all shares index fell by 1.39% or 50.28 points to end at 3,560.46.

Week on week, the PSEi retreated by 1.73% or 119.89 points from its 6,942.21 close on March 8.

“A Friday sell-off caused the local market to end in the red territory last week, snapping its seven-week gaining streak. In the process, the bourse fell below its 10-day and 20-day exponential moving averages,” Philstocks Financial, Inc. Senior Research Analyst Japhet Louis O. Tantiangco said in a Viber message.

“Last week’s drop opens doors for bargain hunting opportunities. However, a strong rally could be difficult amid tempered hopes of a rate cut by the Fed following the above-expected US producer price index (PPI) inflation. Hence, the market may only move sideways,” Mr. Tantiangco said. “Aside from this, investors are also expected to watch out for the remainder of the fourth quarter and full-year 2023 corporate results.”

The Fed will hold its policy meeting on March 19-20.

The US central bank held its target rate steady at the 5.25-5.5% range for a fourth straight time at its January meeting after raising borrowing costs by 525 basis points from March 2022 to July 2023.

US government data released last week showed that its inflation rate accelerated to 3.2% in February from 3.1% in January.

A report from the Labor department showed the producer price index for final demand rose 0.6% in February after advancing 0.3% in January, Reuters reported. Economists had forecast the PPI would climb 0.3%.

In the 12 months through February, the PPI shot up 1.6% after advancing 1% in January. The report followed news on Tuesday that consumer prices increased strongly for a second straight month in February.

“The markets would be anticipating the upcoming Fed rate-setting meeting and decision, as well as the updated Fed dot plot, as source of new market leads on March 20,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort likewise said in a Viber message.

Online brokerage firm 2Trade-Asia.com put the PSEi’s support at 6,800 and resistance at 7,000.

“Brace for price gyrations in tandem with macro headlines as markets remain interest rate sensitive,” 2TradeAsia.com said.

Meanwhile, Mr. Tantiangco placed the PSEi’s support at 6,700 and resistance at 7,000, and Mr. Ricafort put its immediate major support at 6,340-6,470.

“Major resistance over the past two years is at 6,840 levels, for any consistent breach above which would lead to further upside potential towards the 7,100-7,500 levels for the coming months,” Mr. Ricafort said. — R.M.D. Ochave with Reuters