Can the S&P 500 Sustain above 2,400 amid the Tech Rout?


Jun. 13 2017, Updated 7:37 a.m. ET

S&P 500 managed to close with minimal losses

The S&P 500 index (SPY) managed to close with minimal losses last week, closing at 2,431.77 compared to 2,433.79 the week before. Global risk events such as the ECB (European Central Bank) policy statement, former FBI Director James Comey’s testimony. and the UK elections on Super Thursday failed to dent the prospects of the S&P 500 index. The index hit a new high of 2,446.20 after Comey’s testimony when investors turned their focus back to tax reforms and infrastructure spending from the Trump administration.

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Big tech (technology) stocks (VGT) faced a reality or valuation check after a series of reports cited analysts questioning the sharp rise of tech stocks since the beginning of this year. The S&P 500 managed to limit losses as investor interest in financial (XLF) stocks rose before the FOMC (Federal Open Market Committee) meeting on June 14. Prospects of rising yields after a Fed rate hike, which is largely expected in this meeting, led to increased demand for financial stocks.

Speculators are net bearish on the S&P 500 index

According to the Commitment of Traders report, speculators and traders increased the size of their positions in the previous week. The total net bearish positions stood at -7,343 contracts, increasing by 750 contracts compared to the previous week. The data were only through June 6, and the bearish positions might have increased after the tech sector rout on NASDAQ (QQQ).

The week ahead

The FOMC meeting is likely to overpower any economic data, but US inflation and retail sales data are likely to have an impact on the rate hike decision. Investors will also be watching for any continued negative momentum from the tech sector (IYW) rout on Friday.

In the next part of this series, we’ll analyze the performance of the US dollar in the eventful week.


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