Weekly Stock Market Update & SPY Technical Analysis
Inflation takes center stage this week as investors brace for November's Consumer Price Index (CPI) report. After a promising dip to 2.4% in September, inflation has edged higher, rising to 2.6% in October and now projected to hit 2.7% in November. This upward trend comes just days ahead of the Federal Reserve's FOMC meeting, where officials are expected to decide on the next steps for interest rates.
The U.S. labor market’s resilience has prompted the Fed to implement aggressive rate cuts recently, but these actions have inadvertently reversed progress on inflation. If inflation continues to rise, the Fed may face a difficult choice between two unappealing outcomes: tolerating runaway inflation or risking a sharp increase in unemployment. U.S. consumers and businesses, having already endured the pain of high inflation, could face further economic strain if prices continue to climb. Controlling inflation requires tighter monetary policy, yet the Fed seems inclined to loosen its stance despite clear warning signs.
The most optimistic outcome this week would be an inflation reading below the expected 2.7%, which could restore confidence that inflation is under control. However, if the report meets or exceeds expectations, the Fed must tread cautiously to avoid over-cutting rates too soon.
Probabilities and Fed Outlook
The prevailing expectation is that the Fed will downplay this week’s inflation data and proceed with rate cuts at next week’s meeting. Despite their claims of independence, political pressures—particularly from the newly elected president—are likely to influence their decision-making. With unemployment on the rise, the Fed may prioritize job growth over inflation control, increasing the likelihood of a rate cut.
SPY Technical Analysis
In recent weeks, capital has rotated out of high-growth names like Nvidia and into more stable performers like Apple and Meta, signaling healthy market rebalancing. This shift has contributed to modest upward movement in major indexes, including the S&P 500 ETF (SPY).
SPY’s daily chart reveals a slow but steady climb, supported by consistent buyer interest despite overbought conditions. While the overall trend remains bullish, the week ahead brings heightened sensitivity to inflation data and the Fed’s upcoming decisions. Investors should closely monitor these developments, as they could catalyze significant moves in the broader market.