Weekly Stock Market Update & SPY Technical Analysis
New Fed Chairman Kevin Warsh spoke last week ahead at the annual European Central Bank (ECB) Forum in Sintra, Portugal. One key remark that stood out to the Hyper Stocks team was his promise to “disappoint” anyone who thinks he will target inflation running higher than 2%. The reason this is worth noting is because it ties directly to The Fed’s interest rate decisions.
Trump & Warsh
Shortly after being nominated by Trump to replace Jerome Powell, worries surfaced that Warsh would cut rates to appease Trump rather than stick to the Fed’s dual to serve the American public. We’ve covered the implications behind all this many times in our analysis. Markets were actually anticipating this in a good way…because rate cuts typically lead to more spending and economic growth, but they simultaneously lead to inflation if left too low for too long. But Warsh’s promise last week may be the exact reason high growth stocks sold off.
Earnings Compression
Growth stocks are valued heavily on future earnings, and when investors believe rates may stay higher, or inflation risk may remain elevated, those future earnings get discounted at a higher rate. In simple terms, the same company can still be growing, but the market may be willing to pay a lower multiple for that growth.
If Warsh is signaling that the Fed will not rush into easy money until inflation is clearly under control, then the market has to reprice the “lower rates soon” trade. That puts pressure on the most expensive areas of the market first: AI, software, high growth tech, and anything trading on long term expectations rather than near term earnings.
Economic & Earnings Calendar
The economic calendar this week is light, but it’s time to prepare for earnings, which will kick off towards end of week with Delta Air Lines then go into full gear next week with financials / banks and a few other notable names like ASML, TSMC, Netflix, GE Aerospace…and more reporting.
Earnings season is usually one of the BEST times to find winning stocks for weeks and months to take on because it gives us a live look at how a company is doing and what they’re projecting. There are key things we look for…we’ll point them out in our earnings analysis over the coming weeks. Should be a fun earnings season.
SPY Technical Analysis
The S&P 500 has already started to lag behind the Dow Jones Industrial Average over the last few weeks as large cap technology drags on the index. Because mega-cap tech carries so much weight in the S&P 500 and Nasdaq 100, even a small pullback in names like AI, software, and semiconductors can weigh heavily on the broader index.
Meanwhile, the money leaving tech does not appear to be leaving the market entirely. It is rotating into areas like industrials, financials, healthcare, energy, and other value/cyclical pockets where the Dow has more exposure. This is not necessarily a bearish market signal by itself…it’s more like a rotation signal, which we’ve been preparing for in our positions coming into this quarter. Investors are not abandoning stocks, they are becoming more selective about where they want exposure if rates stay higher, inflation remains sticky, or the market starts questioning how much more upside is left in crowded growth trades…this is why paying attention to the FULL story is so important team…you have to stay ahead of the market by staying up to date on data.