S&P 500 Stuck Between Key Moving Averages as Traders Eye Earnings, January Fed Meeting

S&P 500, Tech Stocks, Federal Reserve, Treasury Yields, Goldman Sachs – Talking Points

  • S&P 500 sinks on rising US Treasury yields, mixed earnings sentiment
  • Only 1 of 11 S&P 500 sector groups positive on Tuesday, that being energy
  • Market participants remain on edge with earnings, January Fed meeting upcoming

Major US equity benchmarks declined on Tuesday after U.S. markets reopened following the long weekend. The S&P 500 closed the session down 1.8%, while the Dow Jones and Nasdaq 100 declined 1.5% and 2.6%, respectively. The S&P 500 finds itself perched in a precarious position, with Tuesday’s session highs testing the 50-day moving average and the session lows testing the 100-day moving average. The 100-day moving average has proven to be support for the two notable dips during December, and bulls may look to this key indicator as a potential reversal point for the index.

U.S. Treasury yields rose sharply during the overnight session following the Bank of Japan’s first policy meeting of 2022. The 10-year U.S. Treasury yield traded back through 1.87%, building on a strong start to 2022. Notably, the 2-year Treasury yield rose to 1.10%, its highest level since February 2020. With yields across the curve pushing higher, equities were under pressure from the opening bell. Just one of the eleven S&P 500 sector groups finished positive on the day, with energy benefitting from surging oil prices. Disappointing trading revenues from Goldman Sachs saw the major investment bank’s shares sink roughly 7%.

US 10-Year Treasury Yield Daily Chart

Chart created with TradingView

Event risk remains high in the coming sessions, with major S&P 500 constituents Netflix, Bank of America, and UnitedHealth all set to report earnings this week. Of the 33 S&P 500 companies to report so far, roughly 70% have beaten their consensus earnings estimate(s). While 70% is a strong beat rate, it lags well behind last quarter’s figure of 81% (Figures according to FactSet).

A disappointing corporate earnings season could place additional pressure on the major U.S. indices, with economic data already hinting at a slowing economy. Consumer confidence, retail sales, and industrial production data have all come in below expectations recently, which may paint a worrying outlook for equities in the near-term. That being said, market participants will learn more about the trajectory of the economy at the upcoming January FOMC policy meeting.

S&P 500 Futures (ES) Daily Chart

S&P 500 Stuck Between Key Moving Averages as Traders Eye Earnings, January Fed Meeting

Chart created with TradingView

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— Written by Brendan Fagan, Intern

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