Good evening. The S&P 500 and the NASDAQ hit all-time highs, the Fed leaves rates unchanged, and the U.S. stock markets will be closed this upcoming Wednesday. 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

• $NFLX
Break above 675.58 🎯 686.44 & 700
• $MRK
Break below 128.06 🎯 125.77 & 124.55
• $GOOGL
Break above 177.79 🎯 180.41 & 184
• $MSFT
Break above 443.40 🎯 450 & 456.17
• $MS
Break above 95.65 🎯 97.32 & 98.67
• $META
Break below 494.36 🎯 483.91 & 476.99

KV’s S&P 500 Analysis

KV here with your weekly SPY levels! The S&P 500 had a nice follow-through going all the way to my $543.77 level we sent out last week, where it paused on Wednesday. Both trendlines you see on the chart above are still holding so I will still be bullish-biased for the price to potentially hit the $550 zone soon.

Weekly Market Recap

Lower Inflation

The U.S. inflation data for May came in lower than expected, with headline CPI inflation at 3.3% year-over-year, down from 3.4% the previous month. This unexpected drop, supported by flat food prices, lower energy costs, and declines in new car prices and airline fares, provided a positive signal for the markets. Core inflation, excluding food and energy, also fell to 3.4%. While the Fed is likely to wait for a few more favorable inflation readings before considering rate cuts, the current data suggests that inflation is not re-accelerating.

Rate Forecast

At the June FOMC meeting, the Federal Reserve kept interest rates steady at 5.25% - 5.5% and updated its rate forecast, indicating only one rate cut in 2024, down from the three projected in March. Despite this apparent hawkish shift, the Fed's long-term view remains unchanged, aiming for a fed funds rate of 3.1% by 2026. This gradual path towards lower rates suggests better borrowing costs ahead for households and corporations and implies potential growth in market valuations and cyclical sectors as the Fed approaches rate cuts.

Soft Landing

The Fed's latest economic projections point towards a "soft landing" for the U.S. economy, with GDP growth expected to stay at or above 2.0% through 2026 and unemployment rates remaining stable between 4.0% and 4.2%. The Fed anticipates that inflation will drop to 2.0% by 2026 without significant economic or labor market deterioration. This optimistic outlook suggests that the current economic slowdown is more of a normalization from elevated growth levels rather than a downturn, potentially leading to stronger economic momentum if inflation moderates and rate cuts begin.

Coming Up…

U.S. markets will be closed on Wednesday for Juneteenth, so volatility is expected to be down this week, especially coming after a CPI + FOMC week. There are still some important economic releases this week though, including retail sales data and housing starts. On the earnings front, no major earnings reports are expected this week.

Key Headlines We’ve Been Reading

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

• Elliott reportedly builds big stake in Southwest Airlines, will seek changes.
• G7 agrees $50bn loan for Ukraine from Russian assets.
• China sells 50-year bonds at record-low yield as demand swells.
• EU hits Chinese EVs with tariffs, drawing rebuke from Beijing.
• Nvidia's 10-for-1 stock split comes with a warning.

Trading Rule Of The Week

That was it for this week!

Stay safe,
KV 👋

Week #25 | June 16, 2024

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