US Stock Market’s Direction is Based on Fed

US Stock Market’s Direction is Based on Fed

$SPY

The US stock market finished lower last week on relatively low volume and volatility.

Perhaps it was the pre-conceived negative earnings expectations due to reports released before the results season started that fueled the lackluster price action.

Perhaps it was options expiration.

Uncertainty over the size of the expected Fed rate cut at the end of the month may have also been responsible for the quiet price action and weak performance.

In the cash market last week

The benchmark S&P 500 Index settled at 2976.61, down 1.2%. For the year, the index is up 18.7%. The blue chip DJIA closed at 27154.20, down 0.7%. It’s up 16.4% in 2019. The tech-based NAS Com finished at 8146.49, down 1.2%. This year, it has gained 22.8%.

Entering the earnings season, analysts expected S&P 500 earnings to have fallen by around 3%, according to FactSet data. At the end of the week, more than 15% of the S&P 500 companies had reported. Of the companies, 79% have posted a better-than-expected profit, according to FactSet data.

So far, there have been no surprises. Most of the times when the bar is set so low, the results are likely to be in line or slightly better.

This week stocks could continue to sideways to lower this week with the price action driven by low volume as many of the major players begin moving to the sidelines ahead of the ECB policy meeting on 25 July and the Fed’s interest rate announcement on 31 July.

Expectations of a 50-bptsrate cut by the Fed will probably drop below 20% Monday. This is based on a Wall Street Journal report released Friday that said the Fed will cut rates by 25-bpts and cut rates later in the year as needed.

If there is volatility, then it will likely remain centered around whether the Fed cuts 25 or 50-bpts.

Some investors continue to say that the Fed must take the aggressive route because policymakers have to convince Wall Street that they are truly serious about providing the firepower needed to continue the current 10-year economic expansion.

Have a terrific week

SPY, Stock, market,direction, Fed, rate, cut,

The following two tabs change content below.

Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

You must be logged in to post comments :  
CONNECT WITH