The S&P 500 Index (CME: ES) has opened the week marginally lower, down 0.04%, as the market continues to balance the bullish momentum from earnings season with renewed hawkish Fed rhetoric. Despite a hotter-than-expected NFP report on Friday, the index closed a fourth consecutive week higher, fuelled by strong earnings from tech giants like Meta and Amazon. However, optimism faces a reality check as Fed Chair Powell emphasizes a “prudent” approach to rate cuts, dampening hopes for an immediate pivot. Despite the dip, the index remains near all-time highs, trading at 4,970.50.
From a fundamental perspective, US stock futures are holding steady as investors eagerly await further earnings reports and economic data this week. Solid earnings from major technology companies buoyed investor sentiment, offsetting concerns stemming from the robust January jobs report. Meta’s impressive performance, including a 20.3% surge in shares after announcing its first dividend, and Amazon’s 7.9% rise in revenue contributed to the positive market mood.
This week’s data deluge kicks off with PMI reports gauging service sector health, followed by consumer confidence insights and FOMC member speeches. Trade balance and crude oil inventories data will add further layers to the economic picture, while unemployment claims and mortgage delinquency discussions round out the week.
From a technical perspective, the S&P 500 Index is trading near all-time highs at 4,970.50, supported by positive earnings. The 4-hour chart signals a bullish momentum, with the index comfortably above the 20-SMA (green line), 50-SMA (blue line) and 100-SMA (orange line).
The bulls appear to be in control for now, with the price action riding above key moving averages and the RSI comfortably above the 50.00 level. However, a major test awaits in the form of Powell’s speech.
Dovish cues could propel the index towards the initial resistance at 4,997.50, potentially extending the rally towards the 5,030.00 level. Conversely, hawkish remarks might trigger a pullback towards the 23.60% Fibonacci retracement level, with further weakness potentially exposing the 38.20% and 50.00% levels.
The S&P 500 Index maintains a bullish outlook, underpinned by strong earnings, although caution prevails following Powell’s comments. Technical indicators suggest potential upward movements towards the all-time high; however, the 23.60% Fibonacci retracement level could act as a significant level should the profit-taking persist.
Sources: TradingView, Trading Economics, Dow Jones Newswire, Reuters.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
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