Weekly Market Update & SPY Technical Analysis
Markets reached another new milestone last week as both the S&P 500 and Nasdaq Indexes touched all time highs. The move was fueled by Nvidia’s stock rally, which led the semiconductor giant’s valuation above $3 trillion, overtaking Apple’s market cap to become the world’s second most valuable company. Whether you believe Nvidia is overvalued or not, the excitement around the stock and artificial intelligence seems to be eclipsing any other fear in the market. Stocks have continued to make new highs this year despite lingering inflation, geopolitical uncertainty, and high interest rates.
The market’s new highs will be tested again this week with new inflation data looming along with the FOMC meeting. The Consumer Price Index (CPI) and Producer Price Index (PPI) will update investors on the state of inflation, which is expected to remain at 3.4% YoY. Inflation has significantly improved from the 9.1% highs since 2022, but has started to tick back up this year, away from The Fed’s 2% target. The Fed has maintained hawkish policies to battle inflation, and they’re expected to do so once again on this week’s FOMC meeting. Chances of an interest rate cut dropped to nearly 0% last week after new market data reflected that the U.S. economy added far more jobs than expected last month. Robust labor market growth is seen by Wall Street as a threat to the progress against inflation, which in turn forces The Fed to maintain current rates. We’ll find out more this week when Fed President Jerome Powell holds his press conference.
Last but not least, the Consumer Sentiment report will be released to end the week on Friday before market open. Consumers started off the year with strong sentiment, but that number has fallen over the past three months as economic challenges take toll on outlook. The preliminary number is expected to come in at 72.3, a slight uptick from last month’s 69.1.
SPY Technical Analysis:
SPY reached a high of 536.90 last week before getting rejected, which makes that our main resistance in focus coming into this week. With so many reports at stake, we’ll likely see increased volatility and even a potential drawdown depending on the results of the reports. If markets decline, the first support in place is 528.60, but our bullish outlook won’t chance unless SPY falls below 519.50.