The S&P 500 continues its upward trajectory, defying earlier market jitters driven by a slightly more hawkish Federal Reserve stance, as robust earnings reports from major technology companies like Microsoft and Meta have provided significant bullish momentum, fundamentally reshaping market expectations.
This sustained upside in the S&P 500 has been largely attributable to a notable absence of potent bearish catalysts. Furthermore, recent economic data, including positive NFP and CPI reports, underscore a rebounding economy. These figures indicate strong employment data without triggering excessive wage growth, and inflation metrics, though slightly elevated, were not as concerning as initially feared, reinforcing a stable economic environment.
While the Federal Reserve’s recent decision to keep rates unchanged was widely anticipated, the removal of the phrase “uncertainty has diminished” from their statement was perceived as less dovish. Initially, this nuance, coupled with Fed Chair Powell’s cautious statements during his press conference—where he avoided explicit forward guidance on September rate cuts—led to a momentary dip in the stock market.
However, any market losses following the Fed’s communication were swiftly erased, primarily due to exceptional quarterly earnings from tech giants Microsoft and Meta. These “big beats” underscored the underlying strength of the technology sector, proving to be a more immediate and powerful driver for the S&P 500 than the nuanced signals from the Federal Reserve.
This dynamic highlights a crucial shift: the market is increasingly data-driven. Central banks, in the absence of clear forward guidance, are deferring to economic indicators for their policy decisions. Consequently, market participants are now scrutinizing economic indicators more intensely, recognizing that hawkish data could trigger significant market repricing and potential corrections.
From a technical analysis perspective, the S&P 500 continues to print new all-time highs, characterized by a “chasers” market where upward movement is driven by inertia. On the daily chart, key support is identified around the 6,200 level, offering a favorable risk-to-reward setup for buyers. The 4-hour chart further illustrates an upward trendline, which successfully held after the post-Fed pullback, confirming sustained buying interest fueled by earnings.
The 1-hour chart showed a break above a downward trendline, signaling increased bullish momentum. However, earnings-driven rallies typically require broader macro support for sustained trends. Given the Fed’s current stance, a pullback could occur in the coming days if upcoming US data proves to be hawkish. Investors should monitor key releases like the US PCE price index, Jobless Claims, Employment Cost Index, and the highly anticipated US NFP report and US ISM Manufacturing PMI.
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