The S&P 500 Index continued its strong downward trend last week, reaching its lowest level since December 17 last year. It ended the week at $6,740, down substantially from the year-to-date high of $7,000. Let’s explore some of the top catalysts for the SPY, IVV, and VOO ETFs this week.
US inflation report
A key catalyst for the S&P 500 and its ETFs this week will be the upcoming US consumer inflation report on Wednesday.
This is a crucial report that forms the second part of the Federal Reserve’s dual role after the labor report.
Data released on Friday showed that the economy shed over 92,000 jobs in February, that worst reading in years. The unemployment rate jumped to 4.4%, while wage growth remained steady.
Economists expect the upcoming US inflation report to show that the headline Consumer Price Index (CPI) rose to 2.5% in February, while the core CPI remained unchanged at 2.5%.
A higher inflation report than expected will make it hard for the Federal Reserve to cut interest rates as Donald Trump has suggested. The S&P 500 Index and other indices do well when the Fed is cutting interest rates.
US and Iran war
The most important catalyst for the S&P 500 Index will be the ongoing war in Iran, which escalated during the weekend, with Israel bombing a key Iranian refinery.
This war has led to a surge in energy prices in the United States and other countries. Brent, the global benchmark, has jumped from the year-to-date low of $55 to over $100. Similarly, the US oil benchmark has continued soaring aa traffic at the Strait of Hormuz fades.
The price of other energy products like natural gas and gasoline have continued rising this year, which will lead to a higher inflation rate in the US.
While energy companies in the S&P 500 Index are benefiting, other sectors, especially transportation and manufacturing, are all under substantial pressure as the war continues
Signs that the war is ending will be bullish for the S&P 500 and other US indices. A good example of this happened on Wednesday last week when the media reported that Iran had reached out to the United States for talks to end the war.
Top corporate earnings
The other key catalyst for the S&P 500, SPY, IVV, and VOO ETFs is the upcoming corporate earnings in the United States.
While the earnings season has largely ended, some important companies will release their numbers this week.
Hewlett-Packard Enterprise and Casey’s General Stores will release their numbers on Monday. Oracle, a top player in the AI industry, will release its results on Tuesday.
Adobe’s results on Thursday will be important as they will demonstrate whether artificial intelligence tools by companies like OpenAI and Anthropic are disrupting its business.
The other top corporate earnings to watch will be Dollar General, Ulta Beauty, Lennar Corporation, UiPath, and Campbell’s Soup.
S&P 500 Index rising wedge pattern
S&P 500 Index chart | Source: TradingView
The other key catalyst for the S&P 500 Index is its technicals, which point to further downside in the near term.
As the chart above shows, the index has formed a rising wedge pattern, which is made up of two ascending and converging trendlines. It has already moved below the lower side of this pattern and the Strong, Pivot, and Reverse level of the Murrey Math Lines tool.
Therefore, the most likely scenario is where the index continues falling, potentially to the next key support level at $6,000.
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