S&P 500 – Talking Points
- S&P 500 on track for worst session since June 28
- Tech leads declines as US Treasury yields soar
- Fed Chair Powell slated to speak Friday after PCE data
Risk assets remain on the back foot to start the week as selling pressure spills over ahead of the Fed’s Jackson Hole Economic Symposium. Volatility appears to be elevated across asset classes as traders eagerly await what Federal Reserve Chair Jerome Powell may talk about in his remarks on Friday. Despite a softer CPI print in July, extremely strong labor market data indicates that the Fed may have the rope required to continue to be strong in the fight against inflation. Friday’s release of PCE data will also go a long way in determining whether inflation truly is rolling over, or if the July CPI print was simply an outlier. Currently, the S&P 500 is on track to post its worst session since June 28th.
US Economic Calendar
US Treasury yields were higher across the curve, reflecting the shift in tone of market participants. The 2-year yield traded back through 3.30%, up nearly 10 basis points on the session. These chunky fixed income moves weighed heavily on stocks, with tech shares drastically underperforming on the session. Netflix shares plunged more than 6% while Amazon fell by more than 3.5%. Apple, the bellwether of the market, was lower by almost 2%. Tech, consumer discretionary and financials were the worst performing sectors of the S&P 500 through midday trading, all down more than 2% respectively.
S&P 500 Futures (ES) 1 Hour Chart
Chart created with TradingView
It would appear that the rejection of the 4300 area on ES marked the near-term top for price action, with downside momentum growing with each passing day. Friday’s session saw a weak close, and follow through occurred at the Sunday futures open with a gap lower. Price has since continued to cascade lower, with 4200 offering little in the form of psychological support. As sellers continue to drive price lower, it may be wise to wait for signs of exhaustion before trying to pick a pivot point.
With such major event risk on the calendar this week, sharp moves such as the one(s) we are currently seeing may become commonplace. Whether this is a case of the market once again getting ahead of itself in anticipation of a major Fed event will simply have to be seen in due course. Powell notably said in his last press conference that the Fed was approaching neutral, and while recent Fedspeak has pushed back on that, recent CPI and PPI prints may allow for Powell to talk down market pricing this Friday. While this all remains pure conjecture, the scenario for a nasty reversal remains in play. Price may look to the 4120-22 area for support if we continue lower, while 4200 or Fib resistance at 4244 could come into play on any upside swings.
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— Written by Brendan Fagan
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