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.