The S&P 500 Index continued its strong rally this week, reaching its highest level on record. It jumped to a high of $6,280, up sharply from the April low of $4,835. It has soared by nearly 30%, meaning it is now in a bull market. This article looks at the top catalysts for the SPY and VOO ETFs, which track this index, this week.
SPY and VOO to react to Donald Trump trade war
The main catalyst for the SPY and VOO ETFs this week will be Donald Trump’s trade war, which he launched earlier this year. This trade war had a deadline of June 9, when countries were required to have reached agreements with the United States.
Only three countries have reached a trade deal so far: the UK, China, and Vietnam. South Korea, European Union, and Japan, among the first countries to reach out to the US, have failed to reach agreements so far as the US has demanded more.
On the positive side, Trump has announced an extension to the trade truce to August 1, when the tariffs announced on Liberation Day will kick off. This decision will further solidify the TACO statement, which implies that Trump Always Chickens Out.
The decision to extend the tariff deadline will likely be bullish for the stock market, including the S&P 500 and Nasdaq 100 indices.
OPEC+ oil output increase
The other notable catalyst for the VOO and SPY ETFs is the oil market after the OPEC+ cartel agreed to increase production for the fourth time. This decision helped to drag the crude oil price on Monday, with Brent and the West Texas Intermediate (WTI) falling to $67 and $66, respectively.
Lower crude oil prices are bullish for the stock market as they help to contain inflation. For example, lower oil prices lead to lower transportation and manufacturing costs.
Lower inflation, on the other hand, pushes the Federal Reserve to cut interest rates leading to lower bond yields. When bond yields fall, investors normally move their money to the stock market.
FOMC minutes
The other notable catalyst for the SPY and VOO ETF will be the upcoming Federal Reserve minutes, which will provide more information about the last meeting.
Fed officials decided to leave interest rates unchanged between 4.25% and 4.50% in the last monetary policy meeting. The accompanying dot plot indicated that the bank would cut rates twice this year.
Therefore, the minutes will provide more color on what to expect. Most analysts are expecting the bank to cut rates starting in the September meeting. Hopes that the bank would cut this month were dashed last week after the US published strong jobs numbers. The data revealed that the economy added over 147,000 jobs in June.
Top corporate earnings
The SPY and VOO ETFs will react to several corporate earnings that will come out later this week. These earnings will provide more information about the state of corporate America in the era of tariffs.
FactSet data shows that the estimated earnings growth is 5%, the lowest growth path since Q4 ’23. The estimate is significantly lower than the 9.4% that existed in March of this year, indicating that investors have become more pessimistic about corporate America.
Some of the companies that will publish their earnings are Delta Air Lines, Conagra Brands, and Levi Strauss. These numbers will come out a week before the official start of the earnings season, when top companies like Fastenal, JPMorgan, Wells Fargo. Bank of New York, and Goldman Sachs will release their numbers.
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