Last week was a bumpy ride for the S&P 500 Index (SPX), which shed roughly 0.6%, as tech stocks took a beating following mixed earnings reports from Alphabet and Tesla. Surging oil prices and climbing Treasury yields only added fuel to the fire. However, crude staged a sharp reversal at the start of the new week due to a temporary thaw in geopolitical tensions. This gave inflation-weary investors a reason to breathe again, and American indices have already responded positively.
But make no mistake—the real test is yet to come. This week, about one-third of S&P 500 companies are scheduled to report, with tech heavyweights like Microsoft, Amazon, and Apple taking center stage. While aggregate profit growth is expected to be solid, the market's reaction will hinge on more than just the headline numbers. Guidance, margin trends, and AI capital expenditure plans will be under the microscope. Strong reports could reignite demand for tech stocks. Nevertheless, with expectations already sky-high, the risk of a sharp sell-off driven by profit-taking lurks just beneath the surface. Meanwhile, the index's forward price-to-earnings ratio, which hovers around 20x—well above its ten-year average—leaves little room for error.
And the volatility isn't coming just from earnings. The Federal Reserve meeting on July 29, along with GDP and Core PCE data, will keep traders on high alert. If the central bank holds interest rates steady and strikes a neutral tone, shares could catch a bid. Be aware that any hawkish signals could trigger a fresh wave of selling.
The final recommendation:
— Buy SPX at the current price ($7,470), targeting $7,580 within one week.
— To protect your position from adverse market movements, place a Stop Loss order at $7,375.
This content is for informational purposes only and is not intended to be investing advice.
