S&P 500 (SPX) index analysis as money market funds hits ATH

By: Invezz

April 09, 2024 at 05:34 AM EDT

The S&P 500 index (SPX) is hovering at its all-time high, as inflows in the US equities market continue rising ahead of the earnings season and inflation report. The index was trading at $5,200 on Tuesday, meaning that it has jumped by more than 9% this year.

Money Market Fund inflows

The SPX index is in a strong uptrend and this performance may continue in the coming months. Analysts cite the fact that Money Market Funds (MMF) inflows are still rising as a bullish catalyst for the index.

Data shows that these funds now hold over $6.11 trillion, the highest point on record. These funds added over $70.5 billion in assets last week, the biggest increase in three months.

Money Market Funds hit an all-time high of $6.11 trillion after a weekly inflow of $70.5 billion (the largest weekly inflow in 3 months) pic.twitter.com/tmRvK4at2G

— Barchart (@Barchart) April 9, 2024

Investors are moving into cash assets because of the rising yields. Data shows that the 10-year yield rose to 4.39% while the 5-year has jumped to 4.40%. This trend has continued after the US published strong economic numbers.

Data published on Friday showed that the US unemployment rate retreated to 3.8% in March while the economy added over 308k jobs during the month. Wage growth continued rising in March.

Therefore, there is a likelihood that the Federal Reserve will hold rates steady for longer. In a statement on Monday, Jamie Dimon, the head of Jamie Dimon, warned that rates could jump to 8% this year. This explains why investors are moving to short-term government bonds.

Therefore, the SPX index will likely see inflows if inflation shows signs of easing in the coming months.

Looking ahead, the important economic numbers to watch will be the upcoming US inflation data scheduled for Wednesday. Economists expect the data to show that the headline inflation rose from 3.2% to 3.4% in March while core inflation is expected to move to 3.8%.

If inflation numbers remain above 3%, there are signs that the Federal Reserve will hold rates higher for longer.

The other crucial catalyst for the S&P 500 index will be the upcoming earnings season, which starts on Friday. Key companies to publish their results will be JPMorgan, Wells Fargo, Progressive, Blackrock, Citigroup, and State Street.

Analysts are increasingly bullish on US equities. In a statement, analysts at Wells Fargo upgraded their estimates for the index. They expect that it will rise to $5,535, citing the AI tailwinds. They noted:

“In our view, the bull market, AI’s secular growth story, and index concentration have shifted investors’ attention away from traditional valuation measures and toward longer-term growth and discounting metrics.”

SPX index forecast

SPX chart by TradingView

The weekly chart shows that the S&P 500 index has been in a strong uptrend for a long time. It spiked to $5,200, much higher than the important support at $4,820, the highest swing in January 2022.

The index has spiked above the 50-week and 200-week moving averages while the Relative Strength Index (RSI) has moved to the overbought level. Also, the Average Directional Index (ADX) has moved above 40, signalling that the trend is strong.

Therefore, the outlook for the stock is still bullish, with the next target to watch being at $5,500. However, there is also a likelihood that it will retest the key support at $4,820 and then resume the uptrend.

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