Market Rebounds with S&P 500 Surging Over 4%, But Fed’s Next Move Keeps Traders Cautious

In a market environment marked by fluctuating confidence, the S&P 500 has reclaimed its upward trajectory, surging over 5% since August 5, following a brief downturn. This rebound is fueled by optimism surrounding decreasing inflation and resilient consumer spending, yet the Federal Reserve’s upcoming decisions keep traders on edge.

With a more than 5% increase since August 5, the S&P 500 is back on track after the plunging, which has been proven to be a brief pause in the upward direction. Traders and investors are re-entering the market as they are encouraged by decreasing inflation and resilient consumer data, leading to optimism that the Federal Reserve may successfully guide the economy to a smooth transition. However, uncertainties remain, with traders cautiously watching upcoming economic data and the Federal Reserve’s next moves, particularly in light of potential interest rate cuts.

Walmart’s strong performance and a positive retail sales report have eased some concerns. On the other hand, Wall Street analysts remain cautious and await more evidence from upcoming earnings reports from retailers.

Walmart has achieved success based on low prices and market share, gains which contrast with the overall decline in consumer spending. This decline is a result of people prioritizing essential purchases and seeking out bargains.

Analysts point out that companies such as Walmart and McDonald’s are taking action by reducing prices. Despite the hope stemming from decreasing inflation and possible interest rate reductions, the future for the retail industry is uncertain. According to Bloomberg reports, some retailers are expected to revise their earnings projections downwards.

The upward trend of the S&P 500 that began in early 2023 was temporarily halted by weak labor data, resulting in a sharp drop on August 5. However, the index rebounded strongly, rallying over 5% in the past two weeks.

The current prices are above both the 20 and 50-period Exponential Moving Averages (EMA) and have crossed, forming a strong bullish signal known as a “Golden Cross” in technical analysis. Additionally, both the Momentum oscillator and the Relative Strength Index (RSI) support the bullish bias of the S&P 500, with the Momentum oscillator registering values above 100 and the RSI above the 50 baselines.

Using the Fibonacci Extension tool with the swing high of 5674.14 (weekly timeframe) and the swing low of 5091.28, a potential upside target may be calculated at 6034.35.

On the other hand, if the S&P 500 falls below the key support level of 5091.28, it could lead to immediate support at 4966.00.

In a week marked by renewed optimism, the S&P 500 surged over 5%, rebounding strongly from a recent dip. This recovery is driven by easing inflation and resilient consumer spending, though traders remain cautious ahead of the Federal Reserve’s upcoming decisions. Walmart’s strong performance, fueled by low prices and market share gains, contrasts with broader concerns in the retail sector, where declining consumer spending and potential downward earnings revisions add uncertainty. Technical indicators point to continued bullish momentum for the S&P 500, yet key support levels remain critical in the face of potential market fluctuations.