Equity markets retreat again on Wednesday as market participants gauge the impact of high-interest rates, high inflation, and the growing chance the US will enter another government shutdown. Debt ceiling negotiations are at the forefront of everyone's mind and are helping to drive the markets, but it is not what will bring the S&P 500 down. A growing number of companies are indicating 2nd quarter or 2nd half weakness that is taking a toll on the earnings outlook. If there is anything that moves the S&P 500, it is the outlook for earnings.

The next 2 days will be a test for the market. The S&P 500 continues to show resistance at the 4,150 level, and the PCE price index is due out on Friday. The index is not expected to give the Fed much reason to pause and may keep equities from moving higher. With the summer fast approaching, the odds of a summer rally are fast diminishing.

Equity markets pulled back on Tuesday as investor confidence erodes. Persistent high inflation, high interest rates, and a lack of debt ceiling resolution have taken their toll, and markets are facing volatility until the issue is resolved. Additionally, there is growing concern discretionary spending will fall sharply this summer and lead to recession.

The next turning point for the market may be at hand. The S&P 500 is within a critical resistance zone with key inflation data due Friday. The PCE price index is expected to remain hot and keep the Fed on its current path.That is still the question to be answered and the market generally doesn't like uncertainty.

Equity markets traded in a tight range on Monday as investors brace for the next PCE inflation report. The report is due on Friday and is not expected to give the Fed or the markets a reprieve. The index may cool at the headline level compared to last year, but the month-to-month figure is expected to accelerate to 0.4% and core inflation will remain steady at 4.6%. This may give the Fed room to pause but does not signal the need for rates to fall.

This week brings another round of earnings from the retail sector. Lowe's kicks it off this morning and may leave the market wanting more. Signals of shifting spending habits have cut into discretionary spending, and competitor Home Depot did not inspire confidence for 2023. As it is, the consensus estimates for 2023 earnings continue to deteriorate, which is a dead weight for the S&P 500.

Equity markets rebounded last week as investors began to embrace the new normal. The new normal is a time of high-interest rates, high inflation and tepid economic growth punctuated by the ups and downs of a rolling bear market. The S&P 500 gained more than 1.65% for the week and broke above the 4,150 level, which is significant. The move could lead to a higher high, possibly as high as 4,300, but a move higher than that is questionable.

The news of the week came out of the retail sector. Retail results are mixed, with consumers shifting toward staples and away from discretionary items and the big box diversified names are the only winners. Foot Locker, a purely discretionary name, not only gave a weak report but guided the entire year lower and that may be echoed this week when the 2nd half of the retail sector issues their reports.

Equity markets advanced on Thursday in hopes the US would reach a debt-ceiling agreement soon. The move led the S&P 500 up nearly a full percentage point to reach the highest level in more than 6 months. The new high may attract new buyers and result in another high, but the market is not out of the woods. The S&P 500 is trading within a tight range that has capped stocks for over a year. A move up to 4,300 is expected, but more than that is just a guess.

Retail earnings are mixed so far. Some are beating expectations, a few are guiding the year higher, but all indicate weakness in the 2nd quarter. The risk for the market is that weakness will linger into the 3rd quarter and results in downward revisions when 2nd quarter results are released. The takeaway is that the S&P 500 is still in a rolling bear market and could hit the next top anytime.

Equity markets rebounded on Wednesday following better-than-expected results from Target. The big box retailer reported strength on the top and bottom lines and maintained its guidance for the year. The caveat is that guidance for the 2nd quarter was reduced due to weakening consumer trends, and the weakness may not be contained to the quarter. If the weakness lingers, and there is no reason to think it won't, Target will reduce its guidance later in the year.

The S&P 500 gained more than 1.0% at the day's high to confirm support at the 30-day moving average. However, the move was capped by resistance at the 4,150 level and may not get any higher. The 4,150 level has been an impossible line for the market to cross for over a year, and nothing in the outlook says that will change now. Even if the index can grind higher, the 4,300 is another line in the sand that will cap gains unless the outlook for the 2nd half begins to improve.

Equity markets pulled back on Tuesday but continue to trade within a narrow range. The move was driven by weaker-than-expected retail sales data and earnings guidance from Home Depot, which suggests further slowing of consumer demand. The news foreshadows what may be a weak reporting season for the retailers, and this week will bring reports from Target and Walmart and others in the industry. The takeaway is that the outlook for earnings in the 2nd half of the year will continue to slide, and the decline may accelerate.

Investors hoping for a summer rally may be disappointed. While the outlook for FOMC interest rate hikes has fallen to near-zero, the outlook for interest rates to stay high is firming. In this scenario, the outlook for S&P 500 earnings will also deteriorate due to declining demand and the deflationary conditions they will create.

Equity markets continue to hover within a tight range below critical resistance. Traders and investors are trying to come to terms with what the new normal will look like, and there is an increasing chance that interest rates will remain high for an indefinite period. Fed president Bostic commented to markets that interest might not come down even with an inflation-killing recession.

The week's action will heat today with earnings reports from big box retailer Home Depot kicking off the retail portion of the earnings cycle. The market expects a mixed report, but the market-moving news will be guidance - the company's parking lots are not as full as last year, which may be a telling indicator. Regardless, the longer it takes for the S&P 500 to move above 4,150, the less chance there is of it doing so.

Equity markets had another tough week and ended the period sourly. The S&P 500 traded in a tight range for the week, but the more telling indication is that resistance persists at the 4,150 level. This level has marked the top for stocks for over a year and is likely to continue to do so. Among other reasons, the yield on Federal debt is paying more than the S&P 500 with less risk and is attracting safe-haven and risk-averse investment dollars.

This week will be another hurdle with economic data and earnings on deck. The data includes retail sales and the Index of Leading Indicators, which are expected to be negative for the 16th consecutive month. On the earnings front, reports from major retailers like Walmart, Home Depot, and Target will tell the tale of the consumer.

Equity markets continue to wrestle with what the "new normal" means for stocks long term. With the rate on the 10-year treasury above 3.0%, it's all too easy to get S&P 500-beating yield with little to no risk. This is a headwind for stocks that may cap gains indefinitely regardless of their performance. This situation is unlikely to change without changing the inflation outlook, which remains hot. The CPI index cooled slightly compared to the previous month but not substantially.

Next week brings another hurdle for the markets. Not only is there a raft of economic data to include retail sales, housing data, and the index of leading indicators but Q1 results are due from the big retailers. The retailers have been struggling with shifting consumer habits, bloating inventory and a tepid outlook for growth; that is not expected to change.