Microsoft leads a 30-point drop in the S&P 500
Crude oil, SPY, and gold ETF must-knows ahead of the FOMC (Part 2 of 4)
SPY ETF
The S&P 500 started declining during mid-day trades on January 27 on the consensus of a disappointing outlook for big companies. The S&P 500 dropped 30 points or 1.5% to 2,027. The SPY ETF and the iShares S&P 500 Index ETF (IVV) also declined. The SPY ETF dropped ~1.7% from the day’s high. Microsoft (MSFT) led the index lower, falling 10% in the day’s trading session. Microsoft dropped to $42.35 per share after the downgrades on its future outlook by many analysts.
The appreciating US dollar also affects US companies’ reduced earnings and the S&P 500 decline. Major US companies like Procter & Gamble (PG), Pfizer (PFE), and Du Pont’s (DD) revenues come from overseas sales. A strong US dollar makes US goods expensive and leads to reduced sales of US products.
The US dollar is appreciating on the expectation of the US Federal Reserve increasing interest rates later this year and the Eurozone’s quantitative easing program. The interest rate decisions are divided between the Federal Reserve and the Federal Open Market Committee (or FOMC). The FOMC will meets on January 27 and 28, 2015. It will announce, at 2:00 PM EST on Wednesday, January 28 th, 2015, its new policy changes. Weakness in wage growth and lower inflation due to low oil prices raise concerns on the FOMC holding firm to its policy decisions.
All these mixed economic signals pulled back the SPY ETF from a resistance level of 205 to a support level of 202. The key support and resistance are at 200 and 205, respectively. The relative strength index (or RSI) is in an uptrend, suggesting a further rise in prices. However, the moving average convergence divergence (or MACD) is below the zero line, suggesting a negative price movement.
You’ll find technical analysis updates for gold ETFs in the next part of this series.
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