Positive Tech Earnings Could Accelerate This Momentum ETF

A less-than-stellar April that saw the S&P 500 push lower could be a distant memory as May gets underway. The momentum entering into the new month could be further fueled by tech earnings that could bolster the investment case for the Invesco S&P 500 Momentum ETF (SPMO).

The proverbial meat and potatoes of SPMO is its focus on large-cap growth names, namely big tech. As such, you’ll see familiar “Magnificent Seven” stalwarts like Nvidia, Microsoft, and Apple. Those could all rally once again behind the persistent theme of artificial intelligence (AI).

That said, big tech will continue to be a prime mover for the S&P 500. And a strong earnings season could be the wellspring to more gains. Companies like Meta and Alphabet have already reported earnings. Meta receiving mix ed reviews despite the announcement to invest more in AI. Alphabet announced a cash dividend program that received investor cheers.

Despite being down about 2.4% within the past month, the index is still up about 8% for the year. That upward trajectory could continue if big tech, given its strong presence in the S&P 500, could resonate with investors via strong earnings. That will bode well for SPMO, which is based on the S&P 500 Momentum Index. The ETF  tracks the performance of stocks in the S&P 500 Index that have a high “momentum score.” Given the dip in April, it could be an opportune time to get exposure to the fund prior to a potential rally behind big tech earnings.

Disinflation Data Could Add Momentum

As often seen in the big players residing in the Nasdaq-100, hotter-than-expected inflation data could bring speed bumps in the current rally, thus stifling momentum. Once again, all eyes will be fixated on the Federal Reserve as more economic data could determine its path to loosening monetary policy — whether rate cuts continue to be pushed back or if any happen in 2024. In the case of the S&P 500 and its bullish momentum, the hope is certainly for the latter.

“Another round of elevated inflation data is likely to lead to a more hawkish-leaning message at the May FOMC meeting,” said Deutsche Bank chief U.S. economist Matthew Luzzetti. “While we expect the Committee will maintain an easing bias, we also anticipate the statement and press conference will echo Chair Powell’s view that firmer inflation prints suggest it will take longer to gain confidence about disinflation.”

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