- S&P 500, NASDAQ Composite end six-day record streaks.
- Despite weaker Friday, US indexes closed in the green for a third straight week.
- US Fed on the docket for next week.
US equities closed mixed on Friday to cap off a week of stunning record closes. Over-eager markets that have been leaning into rate cut bets in recent weeks second-guessed US economic conditions after US Personal Consumption Expenditure (PCE) Price Index figures showed cooling inflation, but consumer spending and housing activity hinted at a US economy that is too robust to allow for a rapid approach on Federal Reserve (Fed) rate cuts.
Money markets repriced odds of a first rate trim from the Fed to the Federal Open Market Committee’s (FOMC) meeting in May, with bets of a March rate cut down to 47% according to the CME’s FedWatch Tool.
US Core YoY PCE Price Index figures for December printed at 2.9% on Friday, below the forecast 3.0% and slipping back from the previous period’s 3.2%. Markets initially rose on reaction to the good news that cooling inflation might lead to faster, sooner rate cuts from the Fed, but an uptick in Personal Spending and Pending Home Sales put a damper on rate hopes.
US Personal Spending rose 0.7% in December compared to the 0.4% forecast and 0.4% previous (revised from 0.2%), and Pending Home Sales jumped 8.3% in December compared to the forecast 1.5% and -0.3% previous (revised from 0.0%).
Revenue forecasts on Wall Street missed expectations for major tech stocks including Intel and chipmaker tool manufacturer KLA Corp, causing equities to rethink recent bullish momentum on tech hopes alongside recent declines in tech darlings Tesla and Apple.
The Dow Jones Industrial Average (DJIA) gained 60 points to close up 0.16% at $38,109.43 while the Standard & Poor’s 500 (S&P) Major equity index closed down 0.07%, shedding a little over 3 points and ending Friday at $4,890.97.
The NASDAQ Composite declined on tech stock hesitancy, losing 55 points and closing down by a third of a percent at $15,455.36.
S&P Technical Outlook
The S&P closed in the green for a third straight week, chalking in 12 winning weeks out of the last 13, and the major index is up nearly 20% from the last significant swing low into $4,102.02 in October.
The S&P 500 is trading well above the 200-day Simple Moving Average (SMA) near $4,425.00, and is in play near the $4,900.00 as investors eye another push towards the $5,000.00 major handle nearby.
S&P 500 Hourly Chart
S&P 500 Daily Chart![]()
Friday’s US Equities: Will the S&P 500 Pullback or Push Forward
The S&P 500, also known as the Standard & Poor’s 500, is a stock market index that tracks the performance of 500 large-cap companies listed on stock exchanges in the United States. It is widely considered as a gauge for the overall health of the US economy and a key indicator for investors.
As of Friday, August 27, 2021, the S&P 500 has been on a bull run, reaching new all-time highs multiple times this year. However, with the recent volatility in the market and uncertainty surrounding the pandemic, many investors are questioning whether the S&P 500 will continue to push forward or will it pull back.
In this article, we will take a closer look at the current state of the S&P 500 and analyze possible factors that may impact its performance in the near future. So, let’s dive in.
Current State of the S&P 500
As of August 27, 2021, the S&P 500 is trading at around 4,509 points, which is a 19% increase from its pre-pandemic levels. This remarkable growth can be attributed to strong economic data, massive government stimulus, and progress in the vaccine rollout.
The S&P 500 is also heavily influenced by the performance of its top five companies – Apple, Microsoft, Amazon, Google, and Facebook – which combined make up about 23% of the index. These tech giants have been outperforming the market this year, thanks to their resilient business models and increased usage of their products and services during the pandemic.
Another contributing factor to the S&P 500’s current state is the decline in bond yields. As a result, investors are shifting their focus from low-yielding bonds to stocks, which offer higher returns. This trend has been particularly evident among retail investors, who have been jumping into the stock market in record numbers.
Possible Factors Affecting S&P 500’s Performance
1. Delta Variant and Rising COVID-19 Cases
One of the biggest threats to the S&P 500’s growth potential is the spread of the highly contagious Delta variant of COVID-19. As the number of cases continues to rise in countries like the US, investors fear that this may lead to renewed lockdowns and further disruptions to the economy.
Moreover, the increasing number of breakthrough infections among fully vaccinated individuals has also caused concerns among investors. If the Delta variant continues to spread and cases surge, it could weigh down the S&P 500’s performance in the near future.
2. Federal Reserve’s Tapering
Another factor that could potentially impact the S&P 500 is the Federal Reserve’s plan to taper its bond-buying program. The central bank has been purchasing bonds worth $120 billion each month to provide liquidity to financial markets and support the economic recovery.
However, with inflation levels rising, the Fed has hinted at tapering its purchases by the end of this year. This could result in an increase in interest rates, making borrowing more expensive for businesses and consumers. It could also lead to a shift in investment strategies and potentially drag down the stock market.
3. Political and Geopolitical Uncertainties
Political and geopolitical events have the power to send shockwaves through the stock market. With tensions rising between the US and China and concerns over the upcoming presidential election in 2024, investors may become more cautious and pull back on their investments.
Moreover, any unexpected policy changes by the current administration and geopolitical tensions in other parts of the world could also impact the S&P 500’s performance.
What to Expect on Friday’s US Equities
Based on the current state of the market and the factors affecting its performance, it is difficult to predict the S&P 500’s behavior on any given Friday. However, here are a few possible scenarios:
1. Pullback: If the Delta variant continues to spread, and lockdowns are reinstated, it could lead to a pullback in the S&P 500 as investors become more risk-averse and shift their investments to safer assets.
2. Continued Push Forward: On the other hand, if the economy shows signs of a strong recovery and the Fed remains accommodative, the S&P 500 could continue to push forward and reach new highs.
3. Volatility: With the uncertainty surrounding the pandemic, political events, and the possibility of the Fed tapering its bond purchases, the market could experience increased volatility in the coming months. This could result in sudden swings in the S&P 500’s performance.
Tips for Investing in the S&P 500
1. Diversify Your Portfolio: It is always advisable to have a well-diversified portfolio to mitigate risks and protect yourself from market fluctuations. Consider investing in other assets such as bonds, commodities, and real estate to balance out your exposure to US equities.
2. Stay Informed: Keep yourself updated with the latest news and developments in the market. This will help you make informed decisions and adjust your investment strategies accordingly.
3. Consider Long-Term Investments: Short-term volatility should not deter you from making long-term investments in the S&P 500. History has shown that the market tends to recover in the long run, and patience and discipline are key to successful investing.
Conclusion
In conclusion, the S&P 500’s performance on any given Friday is dependent on various factors and cannot be accurately predicted. However, by staying informed and diversified, investors can mitigate risks and make informed decisions.
Regardless of its short-term performance, the S&P 500 remains a key indicator of the US economy’s health and a valuable asset for long-term investors. As always, it is crucial to conduct thorough research and seek professional advice before making any investment decisions.
