Weekly Stock Market Update & SPY Technical Analysis
Labor market data is back in focus this week with several employment reports scheduled over the next five days. These numbers carry extra weight given growing concerns about the health of U.S. hiring. Fed Chair Jerome Powell noted last week that weakness in the labor market was a key factor behind the recent rate cut, and revised data showed job creation has been well below average in recent months. The most closely watched release will be Friday’s unemployment rate, expected to hold steady at 4.3%. A surprise increase could raise fresh red flags, as elevated unemployment often signals recession risk, a scenario many economists already see as likely within the next year.
Last week:
Economic data came in strong last week. Both the S&P services and manufacturing purchase managers’ indexes (PMIs) held above 50, signaling expansion, and U.S. GDP growth was revised up to 3.8% on the back of stronger exports. Despite the upbeat data, markets finished the week lower, likely because the strength raised doubts about the Fed’s recent rate cut. The Fed moved to cut rates due to labor market weakness, but the risk is that lower rates could fuel inflation if consumer spending remains strong. So now there’s a bit of uncertainty about further rate cuts given the economic resilience. Investors were hoping for two more interest rate cuts this year, but whether or not that’ll happen depends on further economic data. The next rate cut decision will come towards the end of October. We'll be highlighting any significant economic updates in our daily morning updates for our Hyper Stocks Pro members.
Overall market position:
The S&P 500 is currently trading at a price to earnings (P/E) ratio between the mid 20s to low 30s, implying valuations are elevated compared to historical standards. This doesn’t necessarily mean a crash is coming, but investors should keep in mind the premium they are paying for stocks. Even when constructing our watchlists and stock picks, we are finding that good valuations are getting harder to come by. Our path forward will be a bit more prudent, focused on capital preservation rather than offensive trading, and we will focus on different strategies to maximize returns using options and inverse indexes if necessary to play any downside movement.
October & Earnings:
Investors are getting ready to wrap up September, which is historically the worst performing month, but proved to be pretty decent this year. There are still a few days left as of the time of this writing, so anything can happen, however we’re already shifting our focus to the events of October. We’ve already mentioned interest rates and economic reports, but October will also bring about new earnings data. At the heart of it, the long term drivers of markets are interest rates and corporate earnings, markets already have a path to lower rates in their favor, now it’s time for earnings performance. Q3 earnings will kick-off mid-October. We’ll be monitoring those numbers closely as earnings season can birth opportunities and signal exit points for weeks and months ahead. Wanna join us for daily updates and set-ups? Learn more here.
Disclaimer: This article is for informational and educational purposes only and does not constitute financial advice. Investing involves risk, including the possible loss of capital. Always do your own research or consult with a licensed financial advisor before making investment decisions.