Financial Markets Facing Resistance: The Fate of Stocks and Earnings in Summer Hang in the Balance

New York, NY – Investors experienced a rollercoaster ride in the stock market on the last day of the quarter, with both bonds and stocks selling off despite positive inflation news. Despite May core PCE inflation beating expectations at 2.6% over 12 months, the S&P 500 saw some resistance around the 5,500 level. This led to a flat (slightly down) week, with the index dropping four points after reaching intra-day highs in the morning before losing all gains.

The market’s performance was also influenced by the S&P 500 Equal-Weight Index underperforming compared to the market-cap-weighted S&P 500 Index as trillion-dollar market cap stocks drove most of the gains in the last quarter. Despite this divergence, experts suggest that there is no significant downside risk, emphasizing the need for consolidation.

As the market enters a potential trading-range summer, attention turns to the S&P 500’s 200-day moving average, which closed at 5,270 on Friday. Breaking below a rising 200-day moving average, as seen in April, is considered less concerning than breaking below a declining one. With the current trend signaling a bull market, any pullbacks are viewed as temporary corrections in an upward trajectory.

Looking ahead, the market’s direction hinges on second-quarter earnings and economic data. Strong earnings, declining inflation trends, and robust economic indicators could pave the way for further market gains in the coming months.

In Europe, the French parliamentary elections have stirred uncertainties, with the right-wing National Rally leading in the initial round of voting. The outcome of the elections could impact major European stock market benchmarks, especially if pro-EU parties weaken and euro-skeptics gain traction. A shift towards a risk-off environment may occur if certain political outcomes materialize.

Additionally, geopolitical tensions, such as potential renewed hostilities in Ukraine post-Paris Olympics, could further impact the euro’s stability. Any escalation in conflicts could lead to a risk-averse environment, affecting the euro’s exchange rate dynamics.

In conclusion, market expert Ivan Martchev of Navellier & Associates, Inc. provides insights based on his analysis, highlighting key factors influencing market movements. As investors navigate through uncertainties, staying informed on economic developments and geopolitical events remains crucial to making informed investment decisions.