US markets closed green on Monday, with all the major indices ending the day in positive territory. Despite not being the largest gainer on the day, the S&P 500 has caught the eye, due to the closing mark back above the psychologically important level of 5000. Closing out the day at 5010.60 represented a 0.87% addition on the day, still very firmly in bull territory over the last year.
The retreat below this psychologically important in the week gone was largely in reaction to persistently high inflation reports, coupled with dovish commentary from Federal Reserve officials suggesting that the path of interest rate hikes may extend further than anticipated. Such declarations have reignited concerns over the trajectory of future monetary policy as the Fed grapples with price stability without derailing economic growth.
Higher highs, and higher lows on Monday will have been well received, and as you can see over the past 5 days, that is a minor shift.
The S&P 500's movement is greatly influenced by its biggest components, namely tech giants Microsoft (MSFT), Apple (AAPL), and Nvidia (NVDA), with the Information Technology sector boasting the highest weighting in the index. Shifts in their share prices can have an outsized effect on the broader market, and hence, should these companies' stock prices weaken further, it could exert significant downward pressure on the index and related ETFs.
One popular way to gain exposure to the S&P 500 from a trading perspective is with the SPDR S&P 500 ETF Trust, commonly known as the ‘SPY'. The SPY (listed under ticker NYSEARCA: SPY) closed out Monday just below its' own psychologically important level of 500, ending the day at 499.72 (+0.92%), but where do analysts see the benchmark going in the next 12 months?
The Outlook For The S&P 500 Remains Bullish
The SPY gets a lot of coverage from the analyst community as you might expect, and with more than 500 targets from the street, you can get a better gauge of broader sentiment than you might sometimes get from the loudest person in the room (or the analyst shouting on mainstream financial media).
The consensus target on the SPY sits a shade over 13.8% from the current level at $568.72. With the bullish mark of $668.53 set against the bearish level of $465.79 setting the high and low bars, there is clearly some differing opinions on the street, and those are likely tied pretty heavily to their own expectations on Fed decision making.
With the index almost 5% down from the all time highs set last month, and 5.7% up from where we started 2024, this is a critical midground level where one might expect some battleground lines to be drawn (real or psychological).
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A retreat from the highs, a ‘pullback', or a ‘breather' is a healthy sign of functioning markets, and when there is uncertainty (real or perceived) in Fed monetary policy, you can expect a trend to take pause for thought, regardless of direction.
The blend of macroeconomic signals and corporate financial health from a busy earnings period will dictate market dynamics in the coming weeks and months but with the spectre of inflation and the Federal Reserve's deliberations ongoing, some sideways range trading might be more healthy than it seems at first glance.
Bulls will have enjoyed the green Monday and a breaking of the downward streak set over the past week, but with a whole swathe of companies reporting earnings today there is likely to see a bit more volatility in individual constituents.
The Asktraders earnings calendar has the wider list of names reporting today, but with big names such as Microsoft (MSFT), Alphabet (GOOG), Visa (V), GM, PepsiCo, and Snap all delivering numbers, we will be expecting corporate health to be a bigger factor in deciding the day.
