Equity markets advanced on Wednesday despite another cooler-than-expected economic report. The housing starts and building permits figures were weaker than expected despite a recent downtick in mortgage rates. The news indicates a slowing within the housing sector and one that could gain momentum as the year progresses. Mortgage rates are back in the 7.5% range for an average 30-year mortgage and will likely rise, given the outlook for FOMC policy. The FOMC meets in less than a week and is expected to hike rates another 25 basis points.

The S&P 500 continues to rise but is heading for a hard ceiling. How it gets is still questionable, but signs are growing that the top could be closer than many market participants realize. The next target for solid resistance is at an all-time high, which will be reached soon. At the pace the market is advancing, the all-time high could be reached by the end of the summer. If the market can't move to a new high, the odds are high that equity markets will remain range bound for the remainder of the year.

Equity markets continue to move higher as earnings season gets into high gear. Reports from names like Lockheed Martin, Bank Of America, and Charles Schwab were better than expected and fueled the idea of a soft economic landing. The news is good enough that it may impact the outlook for the 2nd half earnings, which would be significant. An improvement in the 2nd half outlook would be a catalyst to lift the S&P 500 to a new all-time high.

The risk for the market is complacency. The earnings season and economic outlook are better than expected, but clouds continue to loom. The FOMC is expected to hike rates by at least 25 basis points, which will pressure the economy. More banks will fail in the coming months, credit conditions will tighten, and demand may begin to contract, putting a cap on the market. That could be at an all-time high within the next few weeks; it could be later this year when the S&P 500 begins to give guidance for calendar 2024.

Equity markets advanced on Monday, starting the week on solid footing ahead of key economic data. Top of the list is the Retail Sales figures expected to show gains versus the previous month and last year. The caveat is that retail sales are expected to grow only 0.3% which is only slightly better than inflation. At this pace, underlying demand is barely growing and compounded by higher prices. With the Fed slated to hike rates at least another 25 bps, there is a risk that demand could turn negative and bring the economy down.

The S&P 500 continues its upward march. The index gained over 0.30% at the session's high to hit a new 1-year closing high. The index looks set to retest resistance near 4,660 and could reach that level within weeks. The question is what the market will do then, which could come down to the outlook for earnings. The FOMC is expected to hike rates, but if the outlook for 2nd half earnings improves, the market will continue to rally and set a new high.

Equity markets advanced last week after cooler-than-expected inflation led the market to price in fewer rate hikes. The S&P 500 advanced 2.5% for the week and closed at a new 12-month high. The index is trending higher and may increase to a new all-time high by the end of the summer. The caveat is that inflation remains high relative to the Fed's target, and the committee remains on track for additional rate hikes.

The risk for the market is that inflation will cool and stabilize at a lower level but at a level still too hot for economic stability. In that scenario, the Fed could hike rates again later this year and put the base rate at 550 basis points or higher. That would push mortgage rates above 8.0% and cap demand for goods and services across industries and verticals. So, the market marches higher, but it may be headed for a hard ceiling and another deep correction.

Equity markets rallied on Thursday after another cooler-than-expected inflation report. The PPI came in below expectations and fueled hopes that inflation would soon be a thing of the past. The caveat for traders and investors is that inflation remains hot at the consumer level, and the FOMC is on track to hike rates by at least 25 basis points. The full impact of the hikes done over the past year is still not fully felt; the impact of another could tip the economy into a recession.

The S&P 500 gained nearly a full percent for the session to set a new high. The index is trading at its highest level in over a year and is set to tackle even higher levels. The next hurdle is 4,660; a new all-time high is likely if the market can move above there. The question is where the index ends the year. The expectation is for a year of flat returns. With the index showing gains for the year and moving higher, the outlook implies a correction is coming.

Equity markets advanced on Wednesday following a cooler-than-expected CPI report. The CPI report was cooler than expected on a month-to-month and YOY basis and at the headline and core levels, spurring the index to advance roughly 1.0% at the high of the day. The bad news is that CPI is still hot relative to the Fed's target and did little to alter the outlook for interest rates. The data caused the odds for a 25 basis point hike to increase to near 100%.

The S&P 500 advanced on Wednesday, but resistance has slowed the index's advance. The next target for strong resistance is near 4,600, which might be reached within the next few weeks. The risk for the market is that the July Fed meeting or the Q2 earnings reporting cycle could cap gains. The EPS outlook continues to deteriorate, and additional interest rate hikes will do little to alter the trend.

The S&P 500 moved modestly higher on Tuesday while traders and investors waited for the July CPI report. The report, expected to show cooling inflation, is not expected to alter the trajectory of FOMC interest rate hikes, but that may not matter. The summer market is melting up on AI while most market participants sit on the sidelines in wait-and-see mode. They are waiting to see if the FOMC will cause more banks to fail and spark the recession looming in the last 4 quarters.

The market is melting-up now, but how high it goes depends on the economy. If the economy can withstand another 25 or 50 basis points of interest rates, the S&P 500 could set a new all-time high. The risk is that rising rates will cause more bank failures and other signs of economic distress exist. The pace of layoffs remains robust, suggesting rotation within the labor market as businesses adjusted to the "new normal".

Equity markets tread water on Monday while traders prepared for this week's main event; the CPI report. The CPI is set to be released on Wednesday. The data is expected to be mixed, with monthly gains accelerating and YOY comparisons decelerating from the previous month's data. However, the takeaway will likely be hawkish, with core CPI still hot at 5.0% YOY or hotter. Regardless, the Fed will unlikely sway from its intention to hike rates later this month and put additional pressure on the economy.

The summer stock market melt-up looks set to continue despite Monday's tepid trading and the risk of hot CPI data. The S&P 500 continues consolidating above the 4,300 level in preparation for another higher move. The next significant resistance target is 4,600, which may be reached soon. A move above that will depend on the earnings season, and it does not look like a good 1 now. AI will power results for some companies, but it is not enough to offset the weakness expected across the broad market.

Equity markets wobbled last week in holiday-shortened summertime trading. The move was sparked by caution and amplified by the Fed, which continues to trumpet the need for at least 2 more interest rate hikes. The takeaway from the week's action is that traders and investors continue to misprice the FOMC outlook. The odds of another 25 basis point hike moved up to 95% on the news, but the odds of another after that remain below 50%. In this scenario, the market is heading for a reckoning that may come sooner rather than later.

In other news, the labor data remains hot, but signs of weakening should not be ignored. The pace of layoffs fell monthly but remain up by 24% YOY, and the YTD figure is up nearly 250%. At the same time, the pace of planned hiring fell to a multi-decade low on an ex-COVID basis and suggests an economic slowdown is at hand. Likewise, the yield curve inversion fell to the lowest in several decades and suggests recession is imminent.

Equity markets retreated on Thursday after mixed news from the labor market. The ADP report was the news of the day, and it came in much hotter than expected. The data suggests resiliency within the labor market that will underpin wage inflation and inflation this year. Contrary to the ADP, the JOLTs data contracted more than expected, suggesting tightening conditions within the labor market. The takeaway for investors is that the FOMC should be expected to continue hiking rates as indicated, but the end of the cycle is getting closer. The question that remains is how hard the landing will be. Will the US tip into recession in 2023?

Today's action will be driven by the Non-Farm Payrolls report. If it comes in as hot as the ADP or even close, the S&P 500 will likely continue its decline. If so, the line to watch is at 4,300. The summer rally may continue if the market can sustain that level of support. If not, the next major stock market correction may have just begun.