The S&P 500 Index (SPX) is now flying around 7,720. After a recent correction, the market is slowly getting back on its feet and knocking on the door of its all-time highs once again. What’s fueling the comeback? Strong corporate financial results and speculation about the Federal Reserve’s (Fed) next move.
The ongoing earnings season gives a powerful hand to the index. According to the latest data, about 83% of companies that have reported so far have beaten analysts’ profit expectations. Investors are zeroing in on the technology sector in particular. Microsoft and Alphabet are due to unveil their financial results on October 28, with Amazon following on October 29. Solid prints from these heavyweights could confirm that demand for artificial intelligence (AI) technologies remains intact—and give US stock indices another leg up.
Another important factor is the Fed’s rate decision at its October 28 meeting. According to a Reuters poll, 94 out of 100 economists expect borrowing costs to remain unchanged (3.75%–4.00%). This monetary pause could have a positive impact on market sentiment, especially if the regulator’s rhetoric appears less hawkish than investors anticipate.
US Treasury yields pose a real threat, as they are now dancing near multi-year peaks. The high cost of borrowing limits the appeal of equities and could place serious pressure on the S&P 500.
On the technical side, SPX is currently holding above the critical 7,650 support level, attempting to resume its upward momentum. The 7,850 resistance could be the index’s next target.
The final recommendation:
— Buy S&P 500 at the current price of 7,720, aiming to reach 7,850 on a one-month horizon.
— If the market moves against us, place a Stop Loss at 7,650 for better risk management.
This content is for informational purposes only and is not intended to be investing advice.
