Weekly Stock Market Update & SPY Technical Analysis
Investors are bracing for a plethora of key economic updates and earnings reports this week, which may set the tone for market performance in February.
The most important event this week will be the Federal Reserve’s FOMC meeting, where an update on monetary policy will be provided, including a decision on whether to continue the cycle of interest rate cuts. This decision will largely depend on inflation data, which has been promising over the past twelve months. However, a recent uptick in prices suggests that the Fed may hold off on further rate cuts to avoid exacerbating inflation risks. While the Fed has long maintained that it operates independently of political influence, former President Trump recently called on the Fed to lower interest rates. Given the current president's significant influence, markets are uncertain whether the Fed will adhere to its independent course or yield to external pressure. Maintaining steady rates would further combat inflation, but if Chairman Jerome Powell, who is expected to give a speech following the rate decision, succumbs to pressure, a rate cut could occur, potentially triggering a spike in consumer prices.
Just days after the FOMC meeting, the PCE Index, the Fed’s preferred inflation gauge, will be released. This report has remained within the lower half of the Fed’s 2% target in recent months but is projected to rise to 2.6% this Friday—an alarming indication that inflation may be moving in the wrong direction. If the Fed lowers rates and the report confirms an inflation increase, it could trigger panic selling in the markets, making this a critical week for investors to tread carefully.
Also on the agenda is the first reading of Q1 GDP, expected to show that the U.S. economy grew at a rate of 2.5% in Q1 of 2025. This is lower than the 3% and 3.1% growth rates seen in the previous two quarters. Q1 typically exhibits slower growth following the holiday season, so this slight decline may not have a significant market impact.
Lastly, earnings season will continue in full swing this week, with major companies such as Boeing, Lockheed Martin, Starbucks, Microsoft, Meta, Tesla, Apple, Visa, Caterpillar, Exxon, and Chevron (among others) set to report. Earnings reports often influence market sentiment for weeks or months, making it essential to monitor how markets react to these results and the guidance these companies provide for the next quarter.