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S&P 500 reclaims the 4000 mark, as US equities record its best month since 2020 S&P 500 reclaims the 4000 mark, as US equities record its best month since 2020

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Index trades lower ahead of Fed press conference – Crypto News

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  • S&P 500 Forecast: Index trades lower ahead of Powell remarks
  • The Standard & Poor’s 500 closed up 0.76% on Monday at an all-time high.
  • Fed Chair Powell’s remarks on Wednesday will be closely watched.
  • Among pharmaceuticals, Pfizer, Abbvie and Merck report this week.
  • Among tech, Microsoft, Apple, Amazon, Alphabet, Meta Platforms, AMD all release quarterly results.

Another week, another all-time record for the S&P 500 index here in late January. The week got off to an optimistic start with the index closing up a healthy 0.76% on Monday and reaching a new all-time high of 4,929.

Microsoft’s (MSFT) earnings beat, following the Tuesday close, wasn’t enough to inspire the market however. The index danced sideways during the regular session, closing down ever so slightly. And this negativity has continued into Wednesday.

This week hinges on Wednesday’s interest rate decision from the Federal Open Market Committee (FOMC) and the presser from Federal Reserve Chair Jerome Powell. No one really expected a rate cut just yet, and that is exactly what the central bank did. It kept rates flat.

But Powell’s consideration of rate cuts during his presser should bend the market, depending on his statements regarding the schedule for moderating them.

Other than that, this week is full of earnings news. The biggest and largest tech companies in the US are all printing results for the calendar’s fourth quarter, so traders expect the indices to move more than usual based on these mega cap stocks’ results.

S&P 500 News: Wednesday Powell speech watched for clues

The January FOMC meeting, the first of the year, began on Tuesday, but the fireworks don’t start until Wednesday. That’s when the committee determines the fed funds rate, the all-important interest rate range that is the focus of the entire US capital markets. Its decision on Wednesday afternoon to keep them situated in a range from 5.25% to 5.5% hasn’t moved the market since most traders expect policy to change at either the March or May meeting.

The market has given the Fed a 50% chance of cutting rate at the March meeting, higher than earlier in the week.

The main focus will be comments made by Chair Powell at the post-decision press conference. Any clarity on when Chair Powell is prepared to begin cutting rates will determine the stock market’s direction.

Tech stocks lead earnings this week

This week is turning out less exciting for tech investors than expected so far. Both Microsoft (MSFT) and Alphabet (GOOGL) beat the Wall Street consensus late Tuesday, but both stocks sank on Wednesday morning.

The parent company of Google and Youtube saw its ad revenue growth below the market’s target, so shares of Alphabet stock sank more than 6% on Wednesday. MSFT stock was down 1.5% midday as well despite posting a healthy quarter and showing resolute growth in its Azure cloud business.

Thursday, more mega cap tech stocks will post their results. These include Amazon (AMZN), Apple (AAPL) and Meta Platforms (META), owner of Facebook.

Mastercard (MA),  Qualcomm (QCOM) and Boeing (BA) post results after the close on Wednesday. The situation looks less optimistic for Qualcomm after Advanced Micro Devices (AMD) posted a mediocre quarter on Tuesday and gave guidance that underperformed for the current quarter.

Exxon Mobil (XOM) and Chevron (CVX) results on Friday make the session a report card for the oil industry. Also AbbVie (ABBV) results on Friday will be a coda to earlier week announcements from Pfizer (PFE) and Merck (MRK) among pharmaceutical majors.

 

S&P 500 FAQs

The S&P 500 is a widely followed stock price index which measures the performance of 500 publicly owned companies, and is seen as a broad measure of the US stock market. Each company’s influence on the computation of the index is weighted based on market capitalization. This is calculated by multiplying the number of publicly traded shares of the company by the share price. The S&P 500 index has achieved impressive returns – $1.00 invested in 1970 would have yielded a return of almost $192.00 in 2022. The average annual return since its inception in 1957 has been 11.9%.

Companies are selected by committee, unlike some other indexes where they are included based on set rules. Still, they must meet certain eligibility criteria, the most important of which is market capitalization, which must be greater than or equal to $12.7 billion. Other criteria include liquidity, domicile, public float, sector, financial viability, length of time publicly traded, and representation of the industries in the economy of the United States. The nine largest companies in the index account for 27.8% of the market capitalization of the index.

There are a number of ways to trade the S&P 500. Most retail brokers and spread betting platforms allow traders to use Contracts for Difference (CFD) to place bets on the direction of the price. In addition, that can buy into Index, Mutual and Exchange Traded Funds (ETF) that track the price of the S&P 500. The most liquid of the ETFs is State Street Corporation’s SPY. The Chicago Mercantile Exchange (CME) offers futures contracts in the index and the Chicago Board of Options (CMOE) offers options as well as ETFs, inverse ETFs and leveraged ETFs.

Many different factors drive the S&P 500 but mainly it is the aggregate performance of the component companies revealed in their quarterly and annual company earnings reports. US and global macroeconomic data also contributes as it impacts on investor sentiment, which if positive drives gains. The level of interest rates, set by the Federal Reserve (Fed), also influences the S&P 500 as it affects the cost of credit, on which many corporations are heavily reliant. Therefore, inflation can be a major driver as well as other metrics which impact the Fed decisions.

Earnings of the week

Monday, January 29 – Whirlpool (WHR), Nucor (NUE)

Tuesday, January 30 – General Motors (GM), United Parcel Service (UPS), Sysco (SYY), Pfizer (PFE), Alphabet (GOOGL), Microsoft (MSFT), Starbucks (SBUX), Mondelez International (MDLZ), Advanced Micro Devices (AMD)

Wednesday, January 31 – Phillips 66 (PSX), Mastercard (MA), MetLife (MET), Qualcomm (QCOM), Boeing (BA)

Thursday, February 1 – Merck (MRK), Honeywell (HON), Altria (MO), Amazon (AMZN), Apple (AAPL), Meta Platforms (META)

Friday, February 2 – Exxon Mobil (XOM), Chevron (CVX), AbbVie (ABBV), Charter Communications (CHTR)

S&P 500 forecast

The S&P 500 index ran to a new all-time high on Monday but has fallen 0.8% before the Powell presser on Wednesday. This puts the index back at the 9-day Simple Moving Average (SMA). Any dark clouds from Powell, and the S&P 500 will rotate back to the previous all-time high of 4,818. That record high lasted more than two years.

The index remains in an uptrend, however, so the money is on this rally to continue. A break below the 21-day SMA, as well as the January 27 higher low of 4,714, would invalidate the bullish theory.

S&P 500 daily chart

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