The S&P 500 Index remained under pressure last week after the Federal Reserve delivered a highly hawkish interest rate decision. It also wavered as investors reacted to the new ceasefire between the US and Iran, which drove energy prices lower. This article looks at some of the key catalysts for S&P 500 and the key ETFs like VOO and SPY.
S&P 500 Index to react to the US-Iran crisis
One of the top catalysts for the S&P 500 Index is the ongoing US-Iran crisis, which faded last week as the two sides reached an agreement to end the war for 60 days.
This agreement has been viewed widely as a major victory for Iran as it largely gave them all they asked for. They received sanctions relief, allowing them to sell their crude oil internationally at market prices.
At the same time, the US committed to unfreezing some of its assets, giving them access to billions of dollars. Iran will also receive over $300 billion in investments from Gulf countries over time.
Most notably, Iran also received a commitment that Israel will stop its bombing campaign against Lebanon. It received all this in exchange of reopening the Strait of Hormuz, which was open before the war started. This deal led to a plunge in crude oil prices, with Brent and the West Texas Intermediate (WTI) falling below $80.
With the deal signed now, the question is whether each side will implement their part. In a statement on Friday, Iran said that its delegation would not travel to have talks with the US, citing the Lebanon issue. The country also closed the Strait of Hormuz, pushing oil prices higher.
Micron earnings
The S&P 500 Index has been highly sensitive to individual earnings. For example, it recently retreated sharply after the Broadcom earnings, which sent shivers in the stock market.
This week, focus will be on Micron, a company that has recently entered the $1 trillion club. It will publish its financial results on Wednesday, providing more color on its performance.
Micron’s earnings are important because of its size and the fact that it is in the hottest area in the stock market: memory. Indeed, the top gainers in the S&P 500 Index are all firms in the industry, including players like Sandisk, Western Digital, and Seagate. As such, if Micron’s earnings come short of expectations, chances are that it will have a major implication in the stock market.
The other S&P 500 companies that will publish their financial results this week are Paychex, Darden Restaurants, and FedEx.
US PCE report
The S&P 500 Index wavered last week after the hawkish Federal Reserve decision. In the aftermath, US bond yields continued rising, with the rate-sensitive two-year reaching its highest level in years.
There will be several macro data from the US this week, with the most important one being the PCE report that comes out on Thursday. Economists expect this data to show that the PCE jumped 4.0% in May from 3.8% a month earlier. Core PCE, which excludes the volatile food and energy prices, is expected to remain at 3.3%.
PCE is an important number because it is broader than the Consumer Price Index (CPI). It looks at the change in prices across the country, while the CPI focuses on the urban areas. Still, this data will likely not have a major impact on the stock market since it comes a week after the Fed delivered its interest rate decision.