Good evening. The S&P 500 broke a bullish consolidation last week, but upcoming economic data mid-week could impact its stability. Meanwhile, the economy shows signs of a gentle slowdown easing inflation, the labor market is gradually loosening, and central banks have initiated rate cuts. Here are the top stocks to watch this week and what’s moving the markets.

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Top Stocks & Setups To Watch This Week

• $PFE
Break below 28.20 🎯 27.69 & 26.95
• $ABNB
Break above 150.01 🎯 153.20 & 157.90
• $CAT
Break below 320.34 🎯 317.14 & 308.07
• $AMD
Break above 171.61 🎯 178.29 & 184.92
• $AAPL
Break above 196.95 🎯 199.62 & 203
• $WFC
Break above 59.13 🎯 60.35 & 61.49

KV’s S&P 500 Analysis

KV here with your weekly SPY levels! The S&P 500 finally broke the daily bullish consolidation last week and held it well. The $520 - $524 range is now a significant demand zone, and as long as it holds, we could see new all-time highs in the market. However, important economic data is coming up mid-week, which you can read about below. This data could impact the price, making technicals less significant this week.

Weekly Market Recap

Economic Slowdown

The economy is showing signs of a gentle slowdown, which is seen as positive as it helps ease inflationary pressures. Despite high inflation and the Fed's aggressive tightening, the U.S. economy grew above 2% over the past six quarters. However, high borrowing costs are now filtering through the economy, affecting low- and middle-income consumers. Wage growth has outpaced inflation, boosting consumer spending, but real wage growth has slowed. This slowdown is expected to help achieve a soft landing, controlling inflation without leading to a recession.

Labor Market Normalization

The labor market remains strong but is gradually loosening. The U.S. added 272,000 jobs in May, exceeding expectations, with health care, government, and leisure and hospitality sectors leading the gains. However, the unemployment rate ticked up to 4%, and the number of people unable to find jobs increased. The job openings-to-unemployed ratio has returned to pre-pandemic levels, indicating a less tight labor market. This cooling labor market should lead to slower wage growth, reducing inflationary pressures without causing significant firings.

Rate Cuts

The Bank of Canada and the European Central Bank have initiated rate cuts, signaling the start of a multiyear rate-cutting cycle. The Fed is expected to hold rates steady at 5.5% but may signal future cuts. As economic growth and the labor market moderate, further progress on inflation is expected, providing the Fed cover for potential rate cuts later in the year. Global interest rates have likely peaked and will gradually move lower, making now a good time for investors to diversify fixed-income allocations to manage reinvestment risk.

Coming Up…

It is Fed week once again, and this one promises to be particularly eventful. On Wednesday, we will receive both the CPI inflation data and the outcome of the FOMC meeting. According to the CME FedWatch Tool, there is a 97.8% chance that the current interest rate will remain unchanged. On the earnings front, companies like Broadcom, Adobe, and Oracle are set to report, adding further interest to the week's developments.

Key Headlines We’ve Been Reading

This is what’s caught our eye over the past 7 days.

• Airlines to see $30 billion profit on record passenger numbers.
• India stocks hit record highs after exit polls predict a decisive Modi election win.
• Intel CEO takes aim at Nvidia in fight for AI chip dominance.
• Saudi Arabia set for $11.2 billion haul from Aramco sale.
• China is ‘bizarrely unwilling’ to boost demand.

Trading Rule Of The Week

That was it for this week!

Stay safe,
KV 👋

Week #24 | June 09, 2024

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