The S&P 500 Index staged a strong comeback in the past few weeks as investors bought the dip following the Liberation Day speech by Donald Trump. The index, which tracks the biggest companies in the US, rose to $5,685, its highest level since March 25, and 17% above the lowest swing this year.
S&P 500 Index to react to FOMC decision
The S&P 500 Index will react to the latest statement by the Federal Reserve scheduled for Wednesday this week.
This statement comes a week after the US published mixed jobs numbers last week. A report on Tuesday showed that consumer confidence tanked in April as many of them remained concerned about inflation and the labor market.
Many consumers expect that Trump’s tariffs will lead to higher inflation in the US. Indeed, recent data show that companies like Shein and Temu have started to boost prices by triple digits after the end of de minimis. De minimis exempted imported goods worth less than $800 from taxes.
Another report revealed that US imports surged in March as companies prepared for Trump’s tariffs. This import growth contributed to the US economy contracting in the first quarter of the year.
On the positive side, a report on Friday showed that the labor market was still strong as the unemployment rate remained at 4.2%. The economy added over 177K jobs in April, higher than analysts expected.
It is against this backdrop that the Federal Reserve will start its meeting on Tuesday and then deliver its decision on Wednesday. Economists expect the bank to leave interest rates unchanged, defying Trump, who has pressured officials to cut them.
Officials may have a dovish tilt by signaling that they will cut rates in the next meeting in May. Analysts anticipate at least three more cuts this year.
Top earnings ahead
The S&P 500 Index also reacted to US corporate earnings, most of which came out last week. Top companies like Apple, Amazon, Meta Platforms, and Alphabet have all published their financial results.
The earnings season has been quite strong, with data from FactSet showing that the blended earnings growth of all firms so far stood at 12%, higher than expected.
However, analysts believe that these earnings were transitory as they did not include most of Trump’s tariffs.
Many more S&P 500 Index companies will publish their numbers this week. The most notable ones will be technology companies like Palantir, AMD, Uber, and Shopify.
Other top companies to watch this week will be Williams Companies, Ferrari, Unilever, Constellation Energy, Coupang, Novo Nordisk, Disney, Arm Holdings, and AppLovin.
The other catalyst for the S&P 500 Index will be the rising hopes of a trade deal between the US and China. In a statement on Sunday, Trump said that he will be willing to make a trade deal “at some point.”
Read more: S&P 500 Index: Time to sell the SPY ETF in May and go away?
S&P 500 Index Analysis
The daily chart reveals that the SPY Index has been in a strong bullish rally in the past few months. It has jumped from a low of $4,840 to $5,685, its highest level since March 26.
The index has jumped above the 50-day moving average as it formed a V-shaped recovery. It has also risen above the 50-day moving average.
Top technicals like the Relative Strength Index (RSI) and the MACD have all pointed upwards. Therefore, the index will likely continue rising as bulls target the key resistance point at $5,778, the lowest swing on January 13. A move above that level will point to more gains, potentially to $6,000.
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