Weekly Stock Market Update & SPY Technical Analysis
A decisive week ahead for the market as investors await word from The Fed, who’s at a crossroads right now…having to stick to their dual mandate of promoting full employment and price stability during a time where geopolitical uncertainty is extremely high.
The Dual Mandate:
Lower interest rates can stimulate hiring and economic growth, but they also risk reigniting inflation.Higher rates help control inflation but can slow economic activity and weaken the labor market.
These objectives often conflict, unfold over different timelines, and are further complicated by unpredictable global events such as pandemics, wars, and supply chain disruptions.
Wars & Supply Chain Disruptions:
Let’s be real…the war in Iran is somewhat of a “Black Swan” event for the market. Not because of the strikes themselves, but because of their broader implications. We saw what happened in the oil market last week, a spike of that magnitude immediately impacts inflation on the energy side (think your gas bill), then eventually spreads to other parts of the economy. Energy is a foundational input. When oil prices surge, transportation costs rise, manufacturing becomes more expensive, and companies across the supply chain begin passing those costs on to consumers.
But the ripple effects don’t stop there.
Higher energy prices also drive up the cost of fertilizer production. Many fertilizers rely heavily on natural gas as a key input, meaning spikes in energy prices can quickly translate into higher costs for farmers. Over the last few weeks, fertilizer stocks like $BG $NTR $ADM $MOS have gained significant marketshare in reaction to the war (we’ve covered a few of these stocks in our watchlists in recent months in anticipation of the rally).
When fertilizer becomes more expensive, farming becomes more expensive. And when farming becomes more expensive, food prices eventually follow.
This is why shocks in energy markets can cascade through the broader economy…moving from oil, to agriculture, and ultimately to the grocery store.
Back to The Fed:
The Fed is not expected to cut interest rates this week. Investors are just hoping for a timeline on when the next rate cut will be. Many analysts have already changed forecasts for rate cuts this year, citing the unforeseen spike in energy as an inflationary signal that demands steady rates, maybe even a rate hike. You can see why that leaves The Fed in a tight spot, especially when the U.S. is seeing a “low fire, slow higher” job market.
Economic Calendar this Week:
- CPI & PPI (Wed)
- FOMC / Rate Decision / Fed Press Conference (Wed)
- Fed Powell Speech (Sat)
We’ll be covering these reports in our morning updates through the week for our Hyper Stocks Pro members.
SPY Technical Analysis:
The volatility index (VIX) is trading higher, which is a leading indicator of uncertainty and “fear” in the market. SPY closed last week just above its 200 DMA, that’s the most “significant” support area going into this week. While we usually like to add to stocks at the 200 DMA, it doesn’t always mean a reversal is immediate. SPY may move below this level and remain below it for weeks / months if uncertainty remains elevated…during this period it’s likely to build a base before moving back to all time highs.
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 conduct your own research or consult with a licensed financial advisor before making investment decisions.
Hyper Stocks and its contributors may hold positions in some of the securities or assets mentioned above. These positions are subject to change without notice. Any opinions expressed reflect current views at the time of writing and are not guarantees of future performance. Past performance does not guarantee future results.