The S&P 500 index has soared 8.6% this year, primarily driven by the strong performances of tech giants Microsoft, Amazon, and Alphabet. However, investors are growing cautious due to the possibility of a US default and recession as a result of the Federal Reserve’s monetary tightening. The market gains are largely concentrated in a few stocks, raising concerns about the sustainability of the momentum over the long term. Nonetheless, the first-quarter increase in consumer spending makes a recession unlikely as incomes are on the rise, and people are spending more on goods and services. The market momentum continues to climb amidst investor apprehension, with Healthcare and Financial sectors performing remarkably well, with gains of 5.07% and 3.58%, respectively. Communication Services has also done well with a gain of 4.6%. However, Basic Materials and Consumer Cyclical sectors have experienced losses, with 0.84% and 1.27%, respectively. As the Federal Reserve meeting and earnings reports, including Apple’s, approach, investors will be closely monitoring the market.
The stock market showed resilience and recovered from a pullback in mid-March, reaching the resistance level at 4169 on April 18. While most investors had expected another leg down that would bring the market to at least its 41-week moving average, as worries about an impending recession intensified, the market found its footing at the 14-week average and bounced back. Though the market has yet to break through key overhead resistance at 4195, the longer-term trend remains up. The monthly MACD indicator is on the verge of flashing a buy signal, and both the monthly Coppock Curve and Stochastics indicators have turned higher, signaling strengthening positive momentum. While risks remain, including weak global economic data, debt ceiling negotiation in Washington and endless regional banks crisis among other factors, the market’s resilience in the face of these headwinds is encouraging. The S&P 500 continues to trend higher over the intermediate term, within a channel that has persisted since December’s low. A decisive breakout over 4195, backed by positive fundamentals, would signal the rally has further room to run.
In summary, while risks remain given slowing global growth and policy uncertainty, the U.S. stock market’s momentum remains positive and the prevailing trend higher is still in place. The market has found willing buyers on pullbacks, suggesting conviction in the rally is still adequate. A break to new highs or a reversal lower will provide more clarity on the market’s next major move. For now, the trend favors further gains, though the road ahead may remain bumpy.