Weekly Stock Market Update & SPY Technical Analysis
The anticipated January market boom has, so far, turned into a bust. However, with several weeks left in the month, there is still time for a turnaround. Key economic data releases, a presidential inauguration, and the start of earnings season remain on the calendar. If these events yield positive outcomes—especially in terms of economic data and corporate earnings—they could propel the market to new highs.
What Has Happened So Far
Since the start of the year, markets have digested new unemployment data released last week, which exceeded expectations. The U.S. unemployment rate dropped from 4.2% to 4.1%. While markets didn’t immediately react, this improvement adds to the growing list of “positive signals” suggesting a potential reversal. This data is significant because it mitigates concerns that unemployment is spiraling out of control due to elevated interest rates.
What’s Next
This week, attention shifts to inflation data, which forms the second critical pillar of economic stability alongside the labor market. The Consumer Price Index (CPI) and Producer Price Index (PPI) are both expected to rise. CPI is projected to increase to 2.9% from the previous reading of 2.7%. If this materializes, it will mark the fourth consecutive month of rising inflation—a troubling sign of accelerating costs.
Despite the Federal Reserve’s efforts to curb inflation through rate cuts, inflation seems to be rebounding sharply. Adding to the complexity, former President Trump’s proposed tariffs are expected to drive prices even higher. Although Trump’s election initially generated excitement among investors, his ambitious policies are now sparking uncertainty. Market participants are questioning whether his strategies will bolster economic growth or push the U.S. into greater economic risk.
Following last week’s labor market report, the likelihood of a rate cut in 2025 has risen to nearly 100%. However, expectations for multiple cuts have been pared back, with investors now anticipating just one. Given the expected inflation spike, even a single rate cut may seem overly optimistic.
Adding to the week’s significance, several major financial institutions—such as JP Morgan, Bank of America, and Wells Fargo—are set to report their quarterly earnings, officially kicking off the first earnings season of the year. Bank earnings are always pivotal to watch because these institutions serve as the backbone of the economy. Their performance can signal the broader health of financial markets, lending conditions, and consumer confidence.
Last but not least, Taiwan Semiconductor Manufacturing Company (TSMC) is also reporting its quarterly earnings this week. As a critical supplier to Nvidia and a bellwether for the semiconductor industry, TSMC’s results are expected to have far-reaching implications. Their performance will offer key insights into how Nvidia and the overall GPU industry fared last quarter, as well as what investors can expect from future earnings this year. Companies like Nvidia and AMD are likely to react strongly to TSMC’s numbers, making this a crucial event for tech investors.
SPY Technical Analysis
Last week, the SPY daily candle dropped to its 100-day moving average and closed right at that level—a key technical indicator it has retested three times over the past year, each time successfully reversing upward. This week, buyers will be looking for bullish signals at this level. However, if bulls fail to step in, SPY could be at risk of falling toward the 565.00–570.00 support zone.