Weekly Stock Market Update & SPY Technical Analysis
The Volatility Index (VIX) spiked last week after the Federal Reserve decided to keep interest rates unchanged, pushing back against pressure from President Trump to cut them. Fed Chair Jerome Powell followed the announcement with a speech that struck a cautious tone, citing ongoing concerns about inflation and the economic impact of tariffs. His remarks added to investor uncertainty and triggered profit-taking across the broader market.
Adding to the pressure was the latest Personal Consumption Expenditures (PCE) index, the Fed’s preferred inflation gauge, which ticked up for the second consecutive month. Rising inflation typically undermines the case for rate cuts, yet the probability of a cut at the September meeting remains high, near 90%. Why? The latest jobs report showed the U.S. economy added just 74,000 jobs last month, well below expectations. Since higher interest rates are designed to slow economic activity, including hiring, this slowdown is a sign the Fed’s policies may be working, possibly justifying a cut despite persistent inflation.
On a more positive note, large cap tech stocks delivered better than expected earnings last week. Companies like Meta and Microsoft stood out by demonstrating how they are integrating artificial intelligence to streamline operations and drive growth. This is helping validate the broader "AI narrative" with tangible use cases now being implemented at scale.
Looking ahead, markets will closely watch the upcoming U.S. trade deficit report. A widening deficit (imports rising faster than exports) could reignite concerns about global demand and the impact of tariffs on U.S. exports, while a narrowing deficit, which could mean the U.S. is buying fewer foreign goods, or selling more goods to other countries (or both) might indicate weakening consumer demand or improving trade balances. Either outcome could influence expectations around future rate policy and investor sentiment heading into August / September.
Amid all this, tariffs are once again weighing on investor sentiment and adding complexity to the economic landscape. Rising costs are already being felt by consumers, and many CEOs on earnings calls are expressing uncertainty about how to issue forward guidance. The tariff situation remains unpredictable, with developments emerging sporadically and deadlines shifting back and forth, making it a key risk factor investors need to watch closely. We’ll be updating this in real time and adjusting our strategy accordingly.
SPY Technical Analysis:
SPY broke below its 20 day moving average line last week, which means it is now trading below its average price from the past twenty days. This is the first time it lost this support level since April, meaning sentiment could be shifting. The fear & greed index has returned from extreme greed to neutral as of Friday, so this week could be more of a decision making week than a directional week. Considering markets are still near the highs of a strong rally, buyers could easily come back at the sign of positive trade developments and take SPY right back to all time high. We’ll be highlighting key levels and possible reversals in our morning updates.