After the S&P 500 (SPY) traded at an all-time high of over 6,000, the index closed down by 2.08%. At 5,857, the index will test the lower channel of its uptrend. Fundamentally, Trump’s controversial appointments and the Federal Reserve’s latest commentary will matter more. They may accelerate the post-election rally’s fade (to the downside).
Markets are highly uncertain about the prospects for healthcare stocks. If the government is less supportive of vaccines, Merck (MRK), GSK (GSK), and Moderna (MRNA) will continue their sell-off.
In the chip sector, Broadcom (AVGO), Micron (MU), AMD (AMD), and Intel (INTC) traded lower last week. Traders took profits in the chip sector, worried about their stretched valuations.
Last week, Fed Chair Jerome Powell abruptly changed his view on interest rate cuts. In a speech and question and answer session, Powell said that the economy is not sending any signals that would rush the Fed to lower rates. After its last rate cut of 25 bps, markets thought that the Fed would cut rates at a consistent 25 bps. Instead, Powell likely saw the core consumer and producer price index remaining too elevated.
The Fed cannot achieve price stability if it ignores that data. In addition, the incoming Trump Administration in 2025 adds inflationary pressures. Mass immigrant deportations and tariffs will re-fuel inflation rates.
