The S&P 500 Index and its top ETFs, like the VOO and SPY, remained in a tight range near their all-time high last week. It was trading at $6,915, a few points below its all-time high of $6,980. This article explores some of the top catalysts for the index next week.

S&P 500 Index to react to government shutdown threat

The first key catalyst for the S&P 500 and its ETFs, like SPY and VOO, is the latest threat for a government shutdown in the United States. In a statement, Chuck Schumer, the Senate Minority Leader, vowed to block a massive spending package this week.

He wants Republicans to stop funding the Department of Homeland Security after a Border Patrol agent shot and killed an American citizen in the ongoing protests in Minnesota. The government shutdown will likely happen this week.

In most cases, the S&P 500 Index and other US indices like the Dow Jones and the Nasdaq 100 ignore government shutdowns because they always get resolved. For example, they all jumped to record highs after the longest government shutdown happened last year.

Top corporate earnings

The other major catalyst for the S&P 500 Index will be corporate earnings by some of the biggest companies in the United States.

Top members of the Magnificent 7, like Microsoft, Meta Platforms, Tesla, and Apple, will release their numbers this week, while Google and Amazon will publish theirs next week.

These are usually the most important earnings events in the United States because of these companies’size, with their market capitalization rising to over $16 trillion.

Most importantly, these firms are at the forefront of the artificial intelligence (AI) industry and are the biggest clients of NVIDIA, a company that has fueled the boom.

Therefore, a sign that their capital spending will continue will be highly bullish for the stock market. However, a sign that they plan to cut spending will be highly bearish for the market.

Additionally, hundreds of S&P constituent companies like Boeing, UnitedHealth, RTX, Mastercard, Visa, Chevron and ExxonMobil will also release their earnings.

A report by FactSet shows that 13% of the companies in the S&P 500 Index have published their earnings report, with the average earnings growth of 8.2%.

Federal Reserve interest rate decision 

The S&P 500 Index and its ETFs will also react to the upcoming Federal Reserve interest rate decision on Wednesday.

Economists believe that the bank will pause its interest rate cuts by leaving them unchanged between 3.50% and 3.75%. Officials will do that so that their recent cuts can take effect in the United States.

The bank has delivered three cuts in the current cycle, with officials signaling that there will be one more cut this year. Recent macro data confirm that there is no need to cut rates this cycle as the economic growth has accelerated.

A report released last week showed that the US GDP expanded by 4.4% in the third quarter, with analysts expecting it to expand by 5% in Q4. 

US and Canada relations 

The other minor catalyst for the S&P 500 Index is the relationship between the United States and Canada, two countries that do trade worth billions of dollars a year.

In a statement during the weekend, Trump warned that he would implement a 100% tariff on Canada if it inks a trade deal with China. He said that in response to a deal that allows China to ship electric vehicles to Canada and pay a 6% tariff.

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