The S&P 500 extended its decline on Wednesday falling a little more than 0.70% at the low of the day after a late day downdraft. The move was small but sparked by a weak ADP employment figure and has the index below a key technical level. The index price action has fallen back into a downward sloping price channel that has been in place since late 2021. At this level, bearish traders may begin to pile back into the market and drive the index down to retest the recent lows near 3,650.

The next hurdle will come on Friday with the NFP report. The NFP report is expected to echo the ADP report and show weaker and weakening trends within the employment sector. The risk is that wage inflation won't subside, however, and add extra pressure on the Fed to raise interest rates.

Equity traders resumed their selling on Tuesday bringing the downtrend to three weeks and the market to a five-week low. The selling intensified under mounting fear the FOMC will not quit hiking interest rates until inflation is in control and that it could mean a very deep recession. The S&P 500 shed about 1.5% at the low of the day and it looks like it will retest the 3,700 level sooner rather than later.

Market fear was stocked by a hotter-than-expected JOLTs figure. The number of job openings surged to 11.2 million and just shy of record highs despite an expectation for openings to fall to 10. million. The figures suggest economic activity is still hot enough to underpin wage inflation if not broader inflation and support the idea of another aggressive FOMC rate hike. The odds of a third 75 basis point hike rose above 70% following the news and the next FOMC meeting is only 3 weeks away.

Equities slipped on Monday extending the prior week's decline and putting the S&P 500 on track to move lower later in the week. The index is now below key resistance levels where the bears are likely to increase their selling and add momentum to the move. All the market needs is a catalyst for lower prices and that could come in the form of economic data. There is a long list of economic reports due out this week including construction spending, the ISM Manufacturing Index, and the August read of the non-farm payrolls report. The report is expected to show a cool down in both hiring and wage gains which takes some pressure off of the Fed. Even so, labor conditions remain tight and wages are rising and underpinning broader inflation.

In stock news, the market is gearing up for Apple's next product event. The iconic company is expected to launch several new iPhone models among other products and drive another upgrade cycle for the business. The question the market will want to have answered is how expensive are the new phones and how many, exactly, does the company think it will sell?

The selloff in the equity markets intensified last week following a bearish technical signal, high inflation, and remarks from Fed chief Jerome Powell. Mr. Powell said inflation was a problem the Fed would fight forcefully adding that businesses and families would feel some pain in the process. The need to fight inflation means higher interest rates meant to cut back on hiring and activity which means fewer business and work opportunities over the next year or two. The S&P 500 fell more than 3.0% at the low of the day and looks like it will fall further in the coming days. The move not only confirms a reversal of long-term proportion but shows a high conviction within the market as well.

This week is another hurdle for the market. The NFP data is due out on Friday and is expected to show a slowdown in hiring as well as an increase in wages which is bad news for the market. In that scenario, labor and consumer markets are already feeling pain but not enough to correct the pace of inflation or stave off aggressive FOMC action.

Equity markets rebounded on Thursday after an upward revision to the 2nd quarter GDP. While the revision is good news, the 2nd quarter GDP was still negative and ultimately worse than expected. The S&P 500 gained about 1.0% on the news at the high of the day and may move higher on Friday.

Friday's action will be driven by both the PCE price index and FOMC Chief Jerome Powell's speech at the Jackson Hole Symposium. The market is hoping Mr. Powell will give some indication the pace of interest rate hikes will ease but it may be disappointed. Even if the pace of inflation comes down, it is expected to remain high for a sustained period of time and is begging for the Fed to act. As it is, the CME's Fedwatch Tool is pricing in a 60% chance for another 75 basis point increase in September and there could be another in November if inflation still hasn't subsided.

The selloff in equity markets took a pause on Wednesday but investors are still cautious ahead of the Q2 GDP revision and PCE price index which is due out on Friday. The revision to the GDP is expected to be an improvement but that could be overly optimistic given the decline in the Index of Leading Indicators. The Index of Leading Indicators declined for the 4th consecutive month suggesting economic contraction continued into the 3rd quarter as well.

The news of the week will be the PCE price index, however, when it is released on Friday. The economists are expecting the pace of consumer level inflation to abate but there is risk in the outlook. Even so, the annualized pace of inflation is expected to remain high, near record levels, and well above the FOMC's target rate of 2.0%. In this scenario, it will take a much-better-than-expected figure to take interest rate hikes off the table and that is unlikely to happen. Investors should be prepared for at least a 50 basis point rate hike at the next FOMC meeting.

Equity markets held their ground on Tuesday despite renewed signals of economic contraction. The flash reading for both the Services and Manufacturing sector PMIs came in below expectation and with the services sector deep in contractionary territory. The reading of 44 is the fifth month of decline and the lowest reading since May of 2020 at the height of the pandemic lockdowns. The news may be a one-off but is compounded by a trend in data that suggests the economic slowdown that began in Q1 is still present in Q2. The Atlanta Federal Reserve's GDPNow tracking tool is still showing Q3 GDP above 0% but it has taken a noticeable downturn in recent weeks.

With the market in retreat, the economic data weak, and the PCE price index due out on Friday the odds of another major sell-off are high. The S&P 500 is still above the 30-day EMA but not by much and it won't take much to spark the move. Once the index is below 4,115 investors should expect to see downward momentum build and the index fall to 4,000 or lower.

Equity markets fell hard on Monday to not only confirm resistance at the S&P 500 level of 4,300 but to break through potential support at the 4,150 level as well. The move also confirms a much larger Head & Shoulders pattern that has been in play all year. This pattern has not only a long-term but a deep implication that could lead the S&P 500 down to the 2,700 level and keep it trending at low levels for an extended period of time. The major culprit for the move is slowing economic activity and the possibility of a deepening recession.

This week, the biggest risk for the market will come on Friday with the release of the PCE Price Index. The index is expected to show a slowdown in the monthly advance of consumer level inflation but for core consumer inflation to remain at record levels on a YOY basis. A better-than-expected figure could send the market higher but a worse-than-expected number will most defiantly send it lower on an increased expectation for another aggressive FOMC interest rate increase.

Equity markets peaked out last week following a round of mixed reports from the retail sector. The takeaway from the reports is that inventory is bloating across the sector and driving an intensifying need for discounting. The news is good for consumers looking for a bargain but bad for businesses hoping to maintain margin and profitability. The result is resulting in downward revisions to the earnings outlook and that is what capped gains in the stock market.

This week earnings will fall to the wayside in favor of economic data and the FOMC outlook. There are few economic reports on the calendar but the list includes the PCE price index. The index is expected to track lower alongside the CPI but is also expected to remain well above the Fed's 2.0% target rate and support the idea of aggressive Fed action at the next meeting.

Equities hovered near break even on Thursday following another decline in the Index of Leading Indicators. The index fell-0.4% in the Month of July making it the 4th straight month of decline but there is some good news. The -0.4% is a better read than the -0.5% indicated by the consensus estimate and an improvement from the prior months -0.7%. If this turns into a trend economic expansion could be back on the table by the end of the quarter but it is too soon to tell.

Next week could be a tough one for the market. There are very few earnings reports on the schedule but at least one major economic report that could move the market. The PCE price index is due out on Friday and will give the latest read on consumer inflation. A better-than-expected report will send the market higher.