S&P 500 Sets a New High Amid Fed Watchful Eye and Earnings Surge

As investors anticipated the earnings results of many major tech companies and the Fed’s interest rate decision, the S&P 500 hit a fresh all-time high on Monday.

The index increased by 0.81% to 4,929.53, above the previous high of 4,906.77, which was reached on January 26. Investors are factoring in large earnings growth expectations and are expecting rate decreases sooner than Federal Reserve officials anticipate. If stock values are sustainable, especially for mega-cap US technology companies, the next few days will be critical.

With 19% of the S&P 500 releasing their results this week, it is the busiest week of the earnings season. Several of the largest tech firms, including Amazon, Apple, Microsoft, Meta, and Alphabet– which have been leading the rally this year — will make their performance public. Investors will also be following the earnings releases from a few Dow members, including Merck and Boeing.

Furthermore, on Tuesday the Federal Open Market Committee will begin its two-day policy meeting. It is nearly a given among investors that the Fed won’t alter interest rates. The CME Group estimates that traders in the fed funds futures market placed a 97% probability on the Fed maintaining current rates at its next meeting. Given that authorities have been attentively observing the most recent economic data, Fed Chair Jerome Powell’s impending press conference is quite important.

Consumer spending has exceeded expectations, yet inflation has not increased as predicted.

The S&P 500 will peak in the coming weeks at about 5,000 if the positive trend continues. But the RSI indicator indicates that the index has entered an overbought state and may “break” in the next days before continuing its rise.

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The highlights of this week’s activities!

The following major economic indicators are expected to be released this week, much anticipation on the part of the financial markets: 

• Australia’s retail sales index on Tuesday, the Eurozone’s consumer confidence and GDP indices, and the US consumer confidence and employment opportunities indices.

• Expectations are that the US Federal Reserve will maintain interest rates at their current range of 5.00% to 5.25% when it releases its interest decision on Wednesday. Regarding the direction of interest rates in the upcoming phase, markets are pricing in a 50% chance of a rate reduction at the March meeting, so all eyes will be on the speech and tone of Federal Reserve Chairman Jerome Powell.

The most significant US events of the previous week were as follows:

• The Manufacturing Purchasing Managers’ Index increased by 50.3 points, above forecasts and the prior reading of 47.9.

• The Services Purchasing Managers’ Index increased, showing a 52.9-point gain that was higher than the prior reading (52.9) and the forecast (51.0).

• The GDP index grew by 3.3% in the fourth quarter, above the prior estimate of 4.9% and the forecast of 2.0%.

• The basic durable goods orders index increased, showing a 0.6% gain that was higher than the prior reading of 0.5% and the expected 0.2% growth.

• The new house sales index increased to 664K, above both the prior figure (615K) and the expected value of 645K.

• The initial jobless claims index rose to 214K, which exceeded expectations (200K) and the previous reading (189K).

• US crude oil inventories fell by 9.23 million barrels, which is lower than expectations (-2.15M) and the previous reading (-2.49M).

• The core personal consumption expenditures price index declined on an annual basis, recording 2.9%, which is lower than expectations (3.0%) and the previous reading (3.2%).

• The personal spending index rose on a monthly basis, recording 0.7%, which exceeded expectations and the previous reading (0.4%).

• The pending home sales index rose to 8.3%, which exceeded expectations (1.5%) and the previous reading (-0.3%).

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Technical Analysis:

EUR/USD:

If the euro against the dollar breaks the pivot point of 1.0865, it may potentially target and test the support levels of 1.0799, 1.0745, and 1.0679. Conversely, if it surpasses the pivot point, it is likely to test resistance levels of 1.0918, 1.0985, and 1.1038.

GBP/USD:

If the pound against the dollar breaks the pivot point of 1.2708, it has the potential to test the support levels of 1.2642, 1.2582, and 1.2516. However, if it exceeds the pivot point, it may test resistance levels of 1.2768, 1.2834, and 1.2894.

USD/JPY:

If the pivot point of 147.82 is broken for the dollar against the yen, there is a possibility that it will target the support levels 146.95, 145.77, and 144.90. But if it exceeds the pivot point, it is likely to target the resistance levels 149.00, 149.86, and 151.04.

GOLD:

If the pivot point of 2030 is broken for gold, there is a possibility that it will target the support levels 2015, 1994, and 1978. But if it exceeds the pivot point, it is likely to target the resistance levels 2051, 2067, and 2088.

BRENT CRUDE OIL:

If the pivot point of 81.72 for crude oil is broken, there is a possibility that it will target the support levels of 79.63, 75.72 and 73.63. If it exceeds the pivot point, it is likely to target the resistance levels 85.63, 87.72, and 91.63.

US30:

If the pivot point of 38,181 for the Dow is broken, there is a possibility that it will target the support levels 37,988, 37,718 and 37,525. If it exceeds the pivot point, it is likely to target the resistance levels 38,451, 38,644, and 38, 914.

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Please note that this analysis is provided for informational purposes only and should not be considered as investment advice.