- SPY falls as yet more yield hikes finally see equities rollover.
- Fed speakers are now in blackout until the Fed rate decision.
- Euro rallies on President Macron winning French reelection.
The week ended on a sour note for equity investors and it looks to be a continuation of that theme on Monday as investors wake up to the news of yet more restrictions and lockdowns in China. Parts of Beijing and significant areas in Shanghai are in lockdown and as a result, industrial production from the global powerhouse that is Shanghai is set to fall further. Consumption from Beijing is also set to take a hit and Chinese stocks suffered some sharp falls on Monday. Last week ended poorly for equity investors with the Nasdaq being the leading index despite it closing Friday lower by 2.65%. Sectoral performance again saw every sector finish in the red. Materials (XLM) and Healthcare (XLV) suffered the most while Consumer Staples (XLP) and Real Estate (XLRE) were the top performing sectors. The momentum (MTUM) versus value (VLUE) debate saw value just about come out ahead but neither sector can exactly be happy, MTUM -3.125 and VLUE closed -2.74%.
Momentum stocks (MTUM) versus Value stocks (VLUE) show how the tide has turned back towards value investing as yields and inflation pick up. Value is now nearly 14% ahead over the past 6 months. For those that do not follow these sectors that closely, momentum (MTUM) stocks are higher risk equities while value is seen as boring and underperformed in the supercycle from March 2020 to October 2021.
SPY stock news
This week is the big week in terms of earnings with nearly 170 of the S&P 500 companies reporting. This week is also big because it’s tech earnings week. Facebook (FB), Apple (AAPL), Microsoft (MSFT), Google (GOOGL) and Amazon (AMZN) all report earnings this week. With the SPY lacking any impetus a strong week of earnings this week is crucial to next quarter’s performance. Also, commentary around supply chains and outlook will be crucial as Shanghai port remains gridlocked. Bond markets will likely calm this week as Fed speakers are now in blackout before the May interest rate decision in ten days. So a combination of strong tech earnings and a lack of hawkish commentary could cause a relief rally for the SPY.
SPY stock forecast
$415 is our key support right now. This was the strong double bottom that led to the contrarian rally that confounded many investors. If we are to rally that needs to hold. Otherwise, a test of the spoke Ukraine invasion low at $410 is obvious and that will really be the last stand for bulls to support that level. Breaking $410 and it is on to $393 pretty quickly due to a volume vacuum. $437 is interim resistance and beyond that $448.
SPY chart, daily