Weekly Stock Market Update & SPY Technical Analysis
The long-awaited interest rate cut happened last week and it propelled markets to another new record high, this time pushing the small-cap Russell 2000 index to its first all time high in years. Now all major indexes are sitting at record highs, pushing valuations of the stock market to levels beyond the dot-com bubble. Despite the astronomical valuations, investors seem to be marching forward and remain optimistic thanks to artificial intelligence spending and ongoing support from the administration.
This week’s focus shifts to inflation data, GDP, and more comments from Fed officials. Inflation data is especially important because this will be the very first report after the interest rate cut, and although the rate change hasn’t had time to make an impact on the economy yet, this report may determine whether or not we see more rate cuts this year. For those who need an economic basics refresher, lower interest rates spark spending, which can lead to a spike in prices. Many argue that The Fed’s decision to cut rates would exacerbate prices again, especially with Trump’s tariffs having their own impact. Fed Chair Jerome Powell highlighted this point in his speech last week, but he also said the rate cut was necessary to improve the health of the labor market, which has slowed significantly over the past few months. This week’s PCE report is set to show a slight increase in year-over-year inflation from 2.6% to 2.7%.
Also on the economic front, GDP data is set for release Thursday before the market opens. This will be the third revision, and economists expect it to hold steady at +3.3%. A solid GDP print not only undercuts recession fears but also reinforces Powell’s comments last week about the upward shift in economic growth. We’ll update the results upon their release in our daily morning analysis for Hyper Stocks Pro members..
Lastly, Fed officials are scheduled to speak each day this week, offering fresh commentary on economic conditions across their districts. We already have a general understanding of where The Fed stands on the economy from last week’s FOMC meeting, but we’ll be monitoring their speeches for any new or standout updates.
SPY Technical Analysis:
The market as a whole seems stretched right now, with the S&P 500 trading at a price-to-earnings ratio of 30.85x, doubling the historical average of 16–17x. This is alarming for the market, but it doesn’t mean a crash or correction is necessarily coming. Markets have proven throughout history that a rally can go on for a long time before a correction happens, especially when investors are excited about innovation and monetary policy supports growth. Artificial intelligence was already fueling stocks higher, and now lower interest rates will only add fuel to the fire by reducing borrowing costs, supporting corporate investment, and keeping liquidity flowing into equities. For now, stretched valuations may remain the “new normal” as long as earnings continue to deliver and investor enthusiasm holds.