SPDR S&P 500: Here’s What Cancelled the SPY Santa Rally

The SPDR S&P 500 (SPY) ETF has crashed in the past four straight days as concerns about monetary policy continued. It plunged to a low of $380, which was the lowest level since November 9. It has plunged by more than 6.80% from the highest level this week and by over 20% from the highest level this year. 

Fed cancels Santa Rally as SPY slips

The SPDR S&P 500 ETF has been in a strong bearish trend in the past four days following the hawkish statement by the Federal Reserve. In it, the Fed shocked most investors by sounding hawkish despite the fact that inflation was easing. The most recent data showed that the headline consumer inflation eased from 7.7% in October to 7.3% in November. 

In its decision, the Fed decided to hike interest rate by 0.50% as most investors were expecting. It also vowed to continue reducing its balance sheet. The biggest catalyst for the price action was the decision by the bank to point to more hikes than what analysts were expecting. It expects to hike rates by 75 basis points in 2023 before hitting a strategic pause.

Therefore, the Fed has canceled the Santa Rally, where stocks tend to rally ahead of Christmas. Still, there is still a possibility that the index will gain a few days to Christmas.

Carnival, Cintas, and FedEx earnings

The SPY index will next react to the upcoming earnings from some important constituent companies. Micron, the giant semiconductor company, will publish its quarterly results that will provide more information about the industry. Recently, chip companies have struggled as PC sales have slipped and data center revenue weakened.

FedEx is an important firm because of its market share in the cargo industry. Together with the likes of UPS and DHL, the company is seen as a barometer for global trade. Analysts expect that the company’s business improved in the quarter as costs declined.

Carnival will provide more color about the state of the cruise business. While the industry has recovered, it pricing has been a major issue.

SPDR S&P 500 forecast

The daily chart shows that the SPDR S&P 500 index has pulled back in the past four straight days. It has plunged to the lowest level since November 9. The index has declined below the 25-day and 50-day moving averages while the Relative Strength Index (RSI) has moved below the neutral level.

It also declined below the ascending trendline shown in black. Therefore, the index will likely continue falling as sellers target the next key support at $350.

S&P 500