S&P 500 index ETFs like the Vanguard’s VOO, Blackrock’s IVV, and State Street’s SPY suffered a big reversal this week, falling to the lowest level snce January as concerns about tariffs and artificial intelligence rose. This drop pushed the SPX index to $5,860, down by 4.58% from its highest point this year. Here are the three reasons why the IVV, SPY, and VOO ETFs crashed and what to expect.
S&P 500 index crashed after forming a rising wedge
The first technical reason why the S&P 500 index crashed is that it has been forming a rising wedge pattern. This pattern forms when an asset has two ascending and converging trendlines. A bearish breakdown happens when the two lines near their confluence level.
In the S&P 500 index case, the wedge pattern started to form in July 2024. The upper side of the wedge connects the highest swings in this period, while the lower side links the lowest levels since August.
The S&P 500 index has now crashed because these two lines have reached their confluence level.
On top of this, the index formed a triple-top chart pattern at $6,130, and whose neckline was at $5,777. This pattern happens when an asset hits a major barrier or resistance level three times in a sign that bulls are afraid of placing buy trades above that level.
The S&P 500 index has plunged below the 50-day moving average, a sign that bears ae in control.
Therefore, the path of the least resistance is bearish, with the initial target being at $5,777. A break below that level will signal more downside to the psychological point at $5,500. On the other hand, a move above $6,127will signal that there are enough buyers left in the market.
IVV, SPY, and VOO ETFs fell because of Trump’s tariffs
The other main reason why the IVV, VOO, and SPY ETFs crashed is that Donald Trump insisted that he will move on with his tariffs as soon as next week.
He has pledged a 25% tariff on steel and aluminum and a similar amount for Canadian and Mexican goods. Trump’s team is also working on implementing reciprocal tariffs, where the US changes equal tariffs to what its goods are charged.
These tariffs will have major implications for companies. First, they will lead to thinner margins as firms are forced to pay more for raw materials. Second, the tariffs will lead to higher inflation since companies wll need to cover their tariff cost. This is notable since the US is already seeing higher consumer inflation, which stood at 3.0% in January.
Third, the tariffs will lead to slow economic growth, as consumers abandon making large purchases. As a result, the Fed may be forced to cut interest rates to stimulate the economy, a move that may lead to higher inflation.
NVIDIA earnings
The IVV, SPY, and VOO ETFs crashed after the latest NVIDIA earnings. The company released strong results, demonstrating that the AI infrastructure demand remains.
It quarterly revenues soared to $38 billion, while its guidance for Q1 was about $43 billion. While this guidance was higher than the average estimation, it was lower than that of what some analysts were expecting.
NVIDIA’s earnings are a sign that the AI industry is still doing well, but that it is already going through some slowdown. This is important since the AI theme has been the most important drivers for the S&P 500 index in the past few years. This explains why the AMD stock price and other AI firms like Palantir have also retreated,
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