Week ahead: Top catalyst for S&P 500 Index, SPY, and VOO ETFs

The S&P 500 Index jumped to a record high last week, continuing an uptrend that started on March 30 when it plunged to $6,315. It rose to an all-time high of $7,398, adding trillions of dollars in value.

This rally article looks at the potential catalysts for the index and its ETFs like VOO, SPY, and SPYM. 

S&P 500 Index to react to key corporate earnings

Corporate earnings are the top drivers for the ongoing S&P 500 Index rally.

FactSet data shows that the average earnings growth for the 89% of S&P 500 constituents that have published their numbers is 27.7%.

This is a big number that is more than double what analysts were expecting. 

Most companies have recorded strong earnings growth, with top banks like Goldman Sachs and Morgan Stanley being boosted by trading activity.

Many firms have also started seeing a strong AI boost in their earnings reports. 

While some major American companies will publish their earnings this week, the implication on the S&P 500 Index will be relatively limited. 

The main one to watch this week will be Applied Materials, a $369 billion company that publishes its numbers on Thursday.

Ross Stores, Bath and Body Works, Under Armour, Aramark, and Zebra Technologies will also release. 

Next week will see more big and consequential companies releasing their earnings reports. NVIDIA, the biggest constituent company, releases its numbers on Wednesday, while Walmart releases on the following day.

The other top ones to watch next week are Deere, Workday, Zoom, Cisco, TJX, Analog Devices, and Home Depot. 

US Consumer Price Index (CPI) data

The other major catalyst for the S&P 500 Index and its ETFs will be the upcoming US Consumer Price Index (CPI), which comes out on Tuesday this week.

These numbers come as energy prices remain elevated, with the average gasoline price soaring to $4.25.

Analysts are warning that prices will continue rising amid elevated inventory drawdowns and as the driving season nears. 

At the same time, the upcoming World Cup may put upward pressure on several prices in participating states. Food, airline ticket prices, and other items are expected to keep going up over time.

Wall Street analysts expect the upcoming report to show that the headline Consumer Price Index rose to 3.6% in April from 3.3% in March.

That is a sign that these numbers are moving further away from the Federal Reserve’s 2.0% target. 

The report comes a few days after the US released a stronger-than-expected jobs report.

According to the Bureau of Labor Statistics, the economy added over 115k jobs in April as the unemployment rate remained unchanged at 4.3%.

US-Iran war updates

The SPY, VOO, and SPYM ETFs will also react to any details about the US-Iran war this week. The US gave Iran a one-page proposal to reopen the Strait of Hormuz last week.

This proposal says that the US would end its blockade of the Strait in exchange for Iran ending its shutdown.

On Friday, Trump said that he expected Iran’s response “tonight.” Still, Iran has not sent its response, a sign that officials and the IRGC want more. 

Analysts believe that Iran is not in a hurry to end the war. For one, US intelligence reports have said that Iran maintains its offensive capabilities, while the US inventories have dropped substantially.

There are also reports that Trump has gotten bored with the war and Iran’s reluctance to end it. 

Any new news on the war will have an impact on the stock market. However, these days, the magnitude of the impact has been relatively muted, a sign that investors have already moved on.

This is how the stock market reacts when there is a black swan event.

For example, the US stock market initially plunged after the start of the COVID-19 pandemic and the Russia-Ukraine war, and then rebounded sharply as investors embraced the new normal.