By Camilo Botia
On Monday, the S&P 500 reached a new all-time high as investors anticipated the earnings reports of several large tech companies and the Fed’s interest rate decision.
The index rose by 0.81% to 4,929.53, surpassing its previous record of 4,906.77, set on Jan. 26. Investors are anticipating rate cuts to come sooner than Federal Reserve officials project and are pricing in significant earnings growth expectations. The next few days will be crucial to determine whether stock valuations, particularly those of mega-cap US technology companies, are sustainable.
This week is the most active week of the earnings season, with 19% of the S&P 500 announcing their results. Some of the biggest tech companies, such as Microsoft, Apple, Meta, Amazon and Alphabet — which have been driving this year’s rally — will reveal their performance. Investors will also watch some Dow members’ earnings reports, such as Boeing and Merck.
In addition, the Federal Open Market Committee will start its two-day policy meeting on Tuesday. Investors are almost sure that the Fed will not change the interest rates. According to the CME Group, traders in the fed funds futures market gave a roughly 97% chance that the Fed would hold the rates steady at the next meeting. The upcoming press conference by Fed Chair Jerome Powell is critical, as officials have been closely monitoring the recent economic data. The inflation numbers have been lower than expected, while consumer spending has been stronger than anticipated. The signal that Powell may or may not choose to send during the conference will be crucial in determining the future course of action.
So far, the S&P 500 has gained 3.3% during the month and has remained bullish since October 2023. The new record all-time high is now above 4,900, but a stronger signal must be needed to confirm that the resistance has been broken, such as a second closing price above this level. We have closely monitored the S&P500 trend in the last months, moving in waves about every 100 points. If the bullish trend remains, it will top at around 5,000 in the upcoming weeks. However, the index has entered an overbought condition, as shown by the RSI indicator, and can possibly take a “break” in the upcoming days before resuming its trend.
Please note that this analysis is provided for informational purposes only and should not be considered as investment advice.
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