Weekly Stock Market Update & SPY Technical Analysis
Markets kicked off the second half of the year with a rally into another new all time high, continuing their winning streak from the previous two quarters. 2024 has been a great year for investors thanks to optimism around artificial intelligence and a soft economic landing, but markets will face multiple tests this week, including new inflation data, more comments from Fed Chairman Jerome Powell, and July’s preliminary consumer sentiment report.
The Consumer and Producer Price Indexes will update investors on the latest inflation reading, which is estimated to come in at 3.1%, improving from last month’s 3.3%. The battle against inflation has been ongoing for nearly two years, limiting The Fed’s ability to loosen their monetary policy; however recent comments from Fed officials have been optimistic. Fed Chairman Jerome Powell spoke last week and stated that a rate cut is set to take effect later this year as inflation cools to The Fed’s 2% target. Markets celebrated this update, pushing the S&P to close above the 5500 mark for the first time in history, but several members have also commented that they need to see more economic data to ensure they don’t lower rates prematurely. So this week’s inflation data will be watched closely as it will directly tie into The Fed’s future moves.
High interest rates have proven to be effective at stabilizing prices, but they have also impacted the U.S. labor market. Last week’s employment data showed weakness in hiring and a growing number of new filed unemployment, leading to the total unemployment rate to increase from 4% to 4.1%. Unemployment has been slowly rising for several months, but investors have looked at this as a positive since it means less consumer spending, eventually leading to cooling prices. Consumer sentiment has slowly fallen over the past five months, moving inversely to the unemployment rate. Friday’s report is set to come in at a reading of 68.5, far below the year’s highs of 79.4.
SPY Technical Analysis:
SPY closed at a new all time high on Friday, reaching a level of 555.05, making that our breakout point in focus coming into this week. There’s a chance it gaps to open above it, but a gap up is unlikely to hold considering the multiple economic reports this week. Investors may feel a bit nervous about Powell’s testimony and new inflation data, so keep that in mind early in the week. There are multiple downside supports available that will still leave buyers in control, but 550.50 is a key level to hold since it marked last week’s breakout.