MarketBeat Minute

Equity markets pulled back on Thursday after setting a new intra-day high. A hotter-than-expected read on CPI underpinned by rising gasoline and housing costs sparked the sell-off, leaving investors wondering what to do next. That may be decided today following results from the Big Banks, which are expected to show significant top and bottom-line growth driven by higher interest rates. The takeaway from the reports will be centered on the economy, consumer health, and the outlook for capital returns.

The rebound in the S&P 500 appears to be over. The index shed about 1% after hitting the new high and showed significant resistance at the 30-day moving average. If the market follows through on this signal, it will continue to sell off regardless of bank results. The next FOMC meeting is 3 weeks away; the market does not expect another hike but it is bracing for another hawkish statement.

Equity markets stumbled on Wednesday morning following a mixed PPI report. The Producer Price Index came in hotter than expected at the headline level, showing another acceleration. The monthly gain led to a 2.2% increase compared to last year, the hottest read in months. The core readings were cooler than expected but will likely rise soon. However, the risk for the market comes today with the release of the CPI. Hot CPI data should reinforce the idea that the FOMC will hike rates again this year, but the impact on markets is uncertain.

The S&P 500 continues to defy all logic and closed Wednesday's session with a gain. The combination of hot PPI and Fed minutes did little to stymy bulls, who sent the index up another 0.4% at the end of the session. The move extends the rebound to a 6th day, and a retest of recent highs looks likely. With the earnings season slated to begin on Friday, it is possible the S&P 500 could move up to retest the 2023 highs and possibly set a new high.

Equity markets advanced on Tuesday, with a decline in 10-year treasury yields. The decline in yield may signal a top to the Fed's rate hiking cycle is near, but investors should not rely too heavily on the signal. The decline is likely due to risk-off safe-haven asset seekers moving into bonds following the violence in Israel. The developing conflict could come to a head sooner rather than later due to the involvement of US citizens who are held hostage or dead. The market risks include the possibility of this conflict spinning out of control and leading to a wider-spread war, given the parties involved.

The S&P 500 advanced more than a half percent on Tuesday, but the gains may be limited this week. The PPI and CPI data are due out this week and may give a reason for investors to sell. The analysts expect to see inflation cool compared to the prior month's data, but there is risk in the energy market. Oil prices are up substantially from earlier this year and have yet to show in the inflation reports.

Equity markets started the week on shaky footing following a surprise attack by Hamas against Israel. The S&P 500 shed less than a full percent on the news and rebounded by the end of the session. The move suggests additional upside for the market this week, but there is risk. The CPI index is due out on Thursday and may show a surprise acceleration of inflation. Oil prices have corrected from their recent highs but remain well above 2023 average levels and will underpin inflation.

Oil was the big mover on Monday, gaining more than 4%. The advance shows support at the critical $85 price point and suggests that a rebound is underway. The move in oil is aided by violence in the Middle East. With tensions at historic highs, this conflict will certainly worsen before it improves and weigh heavily on the energy market.

The market also faces risk in the form of earnings. Friday starts peak earnings season and will bring reports from a half dozen US largest banks.

Equity markets went wild last week as stronger-than-expected data and a surge in the 10-year treasury yield drove market sentiment. Both data points suggest the Fed will keep interest rates high for a long time, making the New Normal normal. That means the rates on many consumer products are increasing to match the expectation that the FOMC will not be lowering interest rates any time soon.

This week could bring another round of increased volatility for the S&P 500. Not only is there inflation data coming out, but the peak of earnings season begins on Friday. PPI, CPI, and import prices are due on the inflation front. The CPI should be expected to accelerate compared to the previous month, given the sustained increase in oil prices since summer. The risk now is that the data will lead the FOMC to increase interest rates again and break the economy for real.

The rally on Wall Street fizzled on Thursday as investors braced for the September NFP report. The spiking yield on the ten-year treasury has markets nervous the FOMC will hike rates multiple times before it is through, and the NFP report could provide a cause. The ADP report Wednesday was weaker than expected but does not often track in alignment with the NFP: the Challenger, Gray & Christmas report on layoffs and planned hiring shows intent to hire nearly 600,000 seasonal workers this holiday, putting 2023 on track to be the 3rd strongest hiring year on record.

The next test for the market is next week. The PPI and CPI data are due out mid-week and may provide another reason for investors to worry. The latest indications suggest the CPI will accelerate compared to the previous month on a MoM and YoY basis and will lend further evidence that inflation is not tamed.

Also on tap for next week is the start of the Q3 earnings reporting season. The season kicks into high gear on Friday with reports from the major banks.

Equity markets rebounded Wednesday after the ADP report came in weaker than expected. The takeaway is that bad news is now good news and puts the market in a precarious position. Bad news suggests a weakening labor market that will undermine consumer spending, economic activity, S&P 500 earnings, and inflation. In this scenario, the cure for the illness may be worse than the disease.

The next big hurdle for the market is on Friday. The NFP report is due out and may confirm the ADP weakness. The caveat is that the 2 labor market data do not track in alignment on a month-to-month basis, and the NFP could paint a far different picture. Regardless, the key point in the NFP report will be the wage inflation data. If wages continue to run hot, it may not matter how many jobs are created.

The selling on Wall Street gained momentum on Tuesday, with the S&P 500 falling more than 1.5% at the session's low. The move was driven by a mounting fear that inflation is not tamed and that the FOMC will hike rates again this year. The fear of rising rates and the potential for recession is seen clearly in the yield for the 10-year treasury, which rose to a new high on Tuesday.

The JOLTs report was another catalyst for Tuesday's selloff. The JOLTs report revealed a higher-than-expected number of job openings, pointing to economic resilience. The problem is that job growth and wage creation lead to consumer health, demand, and inflation, which is a problem now. Data due out today includes the ADP report and the Challenger, Gray & Christmas report on layoffs, which should reinforce the idea of labor market health and keep the FOMC's foot on the economic brakes.

Equity markets fell on Monday, starting the week on a sour note. The move was driven by continued fear of higher interest rates for longer and concern that this week's labor data will keep the Fed's foot on the brakes. The S&P 500 fell about 0.5% at the session's low, extending the losing streak to a possible 5th week. If the market can't regain traction soon, a test of the 4,150 level is inevitable.

The NFP report is due out on Friday. The report is expected to show steady job creation while wages accelerate and unemployment falls. In this scenario, the FOMC has no reason to let off the brakes and every reason to continue to keep interest rates high. The risk for the market is that a soft economic landing will keep the labor market solid and wages rising, underpinning higher-than-normal inflation keeping interest rates higher for longer.

Equity markets closed out a down month with a volatile week that ended on a sour note. The S&P 500 fell 5% in the period and is on track to shed another 5% or more. The next week will be another hurdle with key labor market reports due. Another month of solid job gains and 4.5% wage inflation will keep the Fed's foot on the economic brakes if it doesn't push them to hike rates again.

Oil prices rose while the stock market fell. WTI rose to a new 1-year high and may continue higher. The supply/demand imbalance is tilted in favor of higher prices so the trend is up regardless of where oil prices go in the near term. This means investors should expect persistent high oil prices and inflation to continue.

The next stop for the S&P 500 could be near 4,150, 3% below last week's close. That marks a critical support target at a previous resistance point which was pivotal to the summer rally.