SPX Spotlight - Wednesday, Jan 29, 2025: Fed Holds Rates, Markets Retreat
FOMC reports reflected pause in rate cuts with tech earnings stirring volatility.
Introduction
The S&P 500 closed at 6,039.31 (-0.47%) on Wednesday, January 29, 2025, after the Federal Reserve paused rate cuts and tech earnings stirred volatility. The index fluctuated between 6,012.96 and 6,062.83 before settling lower, snapping a two-day winning streak.
Market Drivers and Economic Reports
The key market drivers for the S&P 500 on January 29, 2025 were:
Federal Reserve Decision: The Fed held interest rates steady, breaking a series of cuts that began in September 2024. This decision influenced market sentiment and raised concerns about the future path of monetary policy.
Tech Earnings: Mixed reactions to major tech company reports impacted the market. While Meta (+4.37%) and Tesla (+2.37%) saw gains, Microsoft (-2.62%) declined. Nvidia continued to face pressure, contributing to market volatility.
Inflation Concerns: Fed officials expressed worries about potential inflationary pressures from proposed tariffs, although no new tariffs have been enacted yet. This uncertainty affected market sentiment.
Economic Data: Recent strong GDP growth (3%) and consumption figures (2.9%) from the previous week continued to influence market dynamics, as they suggested a robust economy that might not require further rate cuts.
Sector Performance: Despite the overall index decline, about 70% of S&P 500 companies saw gains, indicating a divergence between the index and its components.
Technical Analysis
Recap
After decent recovery from DeepSeek news, today ended up being a choppy day resulting from FED maintaining rates hold until further notice.
6,014 could be a key support zone for the coming trading sessions. It well aligns with having SPX above 6,000 psychological level.
Bull/Bear Case
6,014 on SPX marks a key support level for tomorrow’s session. The level aligning with EMA ribbon makes it a even stronger support zone that the markets can test before making past the resistance level at 6,064. The overall outlook looks bullish from the recent pullback.
Market Sentiment and Key Indicators
We still have a strong gap to close which may lead to market recovery to all time highs.
The volatility consolidation level as acted as magnet couple of time recently, however, 17.0 still marks a key level which the markets could re-test before making a lower move.
VIX approaching 15.0 level seems a reasonable move to form a structure.
Key Takeaways & What’s Next
Tesla Earnings:
Tesla's performance fell short of expectations, with earnings per share of $0.73 compared to the anticipated $0.75. The company's revenue came in at $25.71 billion, significantly below the expected $27.26 billion. Tesla's stock initially dropped 3.4% in after-hours trading but later recovered slightly. The company reaffirmed its commitment to producing more affordable vehicles, with new model production slated to begin in the first half of 2025.
Microsoft Earnings:
Microsoft reported strong results, with revenue reaching $69.63 billion, a 12% year-over-year increase and above the expected $68.78 billion. The company's earnings per share were $3.23, slightly surpassing the estimated $3.11. Microsoft's performance was driven by its focus on AI and cloud services, particularly through its partnership with OpenAI.
Meta Earnings:
Meta Platforms exceeded analyst predictions with revenue of $48.39 billion and earnings per share of $8.02. However, the company's first-quarter 2025 sales forecast of $39.5 billion to $41.8 billion fell below expectations. Meta's significant AI-related capital expenditure plans of $60-65 billion for 2025 have raised concerns among investors.
Upcoming Catalysts
Economic Data: February CPI report, upcoming GDP and employment figures
Earnings Season: Continued tech earnings reports, particularly Apple's and Intel’s results.
Watch Levels
Support: 6,014
Resistance: 6,064
Closing Thoughts
Will Apple’s earnings break the SPX out of its consolidation, or will tariff fears keep bulls in check? Share your take below!