S&P500 Tests Higher Levels Following CPI Increase

S&P500 Daily Chart

The U.S. Consumer Price Index (CPI) for January 2025 rose by 3.0%, exceeding market expectations and indicating that inflation is not slowing down. Following this result, the U.S. stock market experienced a temporary decline, but as seen in the S&P500 chart, the index is currently testing higher levels. Investors need to assess the impact of persistent inflation on future interest rate decisions.

Future Outlook and Predictions

With the CPI results, the Federal Reserve (Fed) is likely to take a cautious approach toward rate cuts. This could lead to short-term volatility in the U.S. stock market. However, the S&P500 daily chart still shows an upward trend, and it remains within a key resistance level.

1. Inflation Impact and Fed Policy The Fed kept interest rates unchanged at its January FOMC meeting, but the latest CPI data could delay expectations for rate cuts. While the market had priced in several rate cuts for 2024, upcoming economic data could push these expectations further into the future. A prolonged high-interest rate environment could increase corporate borrowing costs and put pressure on stock prices.

2. S&P500 Technical Analysis The chart indicates that the S&P500 is maintaining its uptrend while consolidating near recent highs. If the index breaks above this level, further gains could follow. However, strong selling pressure could trigger a temporary pullback. Moving averages (MA) are still pointing upwards, reinforcing the strong trend.

3. Key Factors for Investors to Watch Investors should keep an eye on the following:

• Fed’s Rate Cut Timing: If inflation remains high, rate cuts may be postponed.
• Corporate Earnings: How businesses perform amid evolving interest rate conditions.
• Technical Indicators: Whether S&P500 can break above resistance or enter a corrective phase.

Explanation for Beginners

The S&P500 is in an upward trend, making it a strong candidate for long-term investment. However, short-term corrections can occur, so using dollar-cost averaging instead of lump-sum investing can be a wise approach. Given the uncertainty surrounding rate cuts, it is essential to monitor market movements carefully.

To mitigate risks in a volatile market, diversifying investments through index funds or ETFs is a solid strategy. For beginners, starting with small investments and gradually gaining experience with market fluctuations is advisable.