S&P 500: Levels That Could Shape the Market
The S&P 500 is facing its first real test of 2025 as robust economic data and shifting Federal Reserve expectations create turbulence. Let’s take a look at the fundamental factors behind the pullback, along with the sector dynamics, and the key technical levels in play.
Why Is the Market Wobbling?
Last week’s payroll report delivered a surprise, with 256,000 jobs added in December, smashing expectations. This has thrown doubt on the prospect of multiple interest rate cuts in 2025. Swaps markets now predict just one quarter-point cut this year, with some analysts suggesting the easing cycle might already be over.
The result? Treasury yields have climbed to 4.8%, their highest since late 2023. Historically, yields nearing 5% have triggered corrections of around 10%. Meanwhile, the dollar index has surged to its strongest level since November 2022, adding pressure on exports and multinational earnings. Even tech heavyweights like Nvidia, Apple, and Meta have felt the strain as investors reassess risk.
Winners and Losers: Sector Trends
Sector performance over the past month has been a mixed bag. Energy has been the standout, up 2.40%, helped by resilient oil prices and geopolitical factors. Technology has managed to tread water, but the rest of the market paints a different picture:
• Real Estate: -7.24%
• Consumer Staples: -5.71%
• Consumer Discretionary: -5.46%
• Materials: -4.75%
• Financials: -4.44%
These figures underscore growing caution, particularly in rate-sensitive sectors like Real Estate and Consumer Staples.
Key Levels to Watch
Since hitting new highs in early December, the S&P 500 has been in mean reversion mode. A descending channel, formed by lower swing highs and lows, has taken the index below its 50-day moving average, reflecting waning momentum.
• Support Levels
The 5,700-5,670 support zone is significant, featuring a cluster of historic swing highs and lows from July, August, October, and November 2024. Below this, the upward-sloping 200-day moving average serves as a pivotal line in the sand, linked to the index’s long-term bullish trend.
• Resistance Levels
The top of the descending channel marks the first major resistance. Beyond that, the December trend highs are the next big challenge for the bulls.
S&P 500 Daily Candle Chart
Past performance is not a reliable indicator of future results
Disclaimer: This is for information and learning purposes only. The information provided does not constitute investment advice nor take into account the individual financial circumstances or objectives of any investor. Any information that may be provided relating to past performance is not a reliable indicator of future results or performance. Social media channels are not relevant for UK residents.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 83% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.
Why Is the Market Wobbling?
Last week’s payroll report delivered a surprise, with 256,000 jobs added in December, smashing expectations. This has thrown doubt on the prospect of multiple interest rate cuts in 2025. Swaps markets now predict just one quarter-point cut this year, with some analysts suggesting the easing cycle might already be over.
The result? Treasury yields have climbed to 4.8%, their highest since late 2023. Historically, yields nearing 5% have triggered corrections of around 10%. Meanwhile, the dollar index has surged to its strongest level since November 2022, adding pressure on exports and multinational earnings. Even tech heavyweights like Nvidia, Apple, and Meta have felt the strain as investors reassess risk.
Winners and Losers: Sector Trends
Sector performance over the past month has been a mixed bag. Energy has been the standout, up 2.40%, helped by resilient oil prices and geopolitical factors. Technology has managed to tread water, but the rest of the market paints a different picture:
• Real Estate: -7.24%
• Consumer Staples: -5.71%
• Consumer Discretionary: -5.46%
• Materials: -4.75%
• Financials: -4.44%
These figures underscore growing caution, particularly in rate-sensitive sectors like Real Estate and Consumer Staples.
Key Levels to Watch
Since hitting new highs in early December, the S&P 500 has been in mean reversion mode. A descending channel, formed by lower swing highs and lows, has taken the index below its 50-day moving average, reflecting waning momentum.
• Support Levels
The 5,700-5,670 support zone is significant, featuring a cluster of historic swing highs and lows from July, August, October, and November 2024. Below this, the upward-sloping 200-day moving average serves as a pivotal line in the sand, linked to the index’s long-term bullish trend.
• Resistance Levels
The top of the descending channel marks the first major resistance. Beyond that, the December trend highs are the next big challenge for the bulls.
S&P 500 Daily Candle Chart
Past performance is not a reliable indicator of future results
Disclaimer: This is for information and learning purposes only. The information provided does not constitute investment advice nor take into account the individual financial circumstances or objectives of any investor. Any information that may be provided relating to past performance is not a reliable indicator of future results or performance. Social media channels are not relevant for UK residents.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 83% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.
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