Weekly Stock Market Update & SPY Technical Analysis
Setting new all time highs has become the norm for the market in recent weeks as stocks continue to charge higher on optimism around cooling inflation and the possibility of a rate cut. Last week’s Consumer Price Index (CPI) reflected another month over month decline in inflation, showing a 3.3% reading vs the anticipated 3.4%. The better than expected number supercharged the S&P to another new all time high, but buying power fizzled out after The Fed’s FOMC meeting and Jerome Powell’s testimony. Fed President Powell was optimistic around the progress on inflation, but despite the improving number, he stated that there will likely only be one interest rate cut this year, below what markets had anticipated. Markets kicked off the year with hopes that there will be multiple rate cuts before year end, but that number has declined to just one per last week’s update. The uncertainty around interest rates makes it difficult for companies and analysts to make accurate forecasts about earnings as the borrowing rate impacts the overall company bottom line. Higher interest rates have been aiding the fight against inflation, but they’re hindering growth and spending, which explains why the lesser than expected rate cut left markets uncertain to end the week.
This week’s focus continues to build on last week, with members of The Federal Reserve once again in the spotlight. Multiple members are set to speak on Monday and Tuesday, kicking off the week with more insight on where The Fed stand on monetary policy. The comments usually bring volatility so keep that in mind as you’re analyzing markets. Another area of focus this week is U.S. Retail Sales. Retail sales have fallen over the last three months in the U.S. as consumers tighten their budgets. Last month’s reading showed 0% growth in April, but the number is expected to improve to 0.3% this month. Retail spending is one the most accurate ways to see how and where consumer are spending their capital, and considering consumers are the backbone of the economy, the report is important to watch.
SPY Technical Analysis:
SPY’s rally after the CPI report release last week moved it to a new all time high of 544.12, which is our main resistance in focus coming into this week. Buyers need a breakout above that for continuation to our next target of 552.00. Keep in mind that markets are still digesting last week’s data and interest rate update, so an early week move shouldn’t be quick to trust. This week is also a shortened holiday week so volume and momentum may be lower than average.