The Hot List
The Fed’s preferred inflation gauge – personal consumption expenditures index (PCE) – will be released on Friday.
2. Federal Reserve
The FOMC left the Fed Funds rate unchanged. Chairman Powell will host a town hall meeting on Thursday.
3. Interest Rates
The 10-year broke out to its highest level since 2007 while 30-year mortgage rates are nearing 7.5%.
4. Capitol Hill
A government shutdown is looking more likely unless Speaker McCarthy can pull together to approve a temporary funding measure.
Investors will hear earnings reports from Costco, Nike and Micron to name a few.
Monday: S&P 500 +3.21 (+0.07%) to 4453.53. No major headlines.
Tuesday: S&P 500 -9.58 (-0.22%) to 4443.95. August housing starts 1283K (vs. 1435K expected).
Wednesday: S&P 500 -41.75 (-0.94%) to 4402.20. FOMC held rates at 5.25-5.50%.
Thursday: S&P 500 -72.20 (-1.64%) to 4330.00. Initial jobless claims 201K (vs. 225K expected). Existing homes sales 4.04M (vs. 4.10M expected).
Friday: S&P 500 -9.94 (-0.23%) to 4320.06. September S&P Global US Services PMI 50.2 (vs. 50.5 prior).
S&P 500 [S&P] Technical Look
Potential Support: To the downside, look for support at 4300 and below at the 200-day moving average.
Potential Resistance: To the upside, look for resistance at previous support around 4400 and above that at 50-day moving average.
Last week I wrote: “From a technical standpoint, this sideways, “coiling” action we’ve seen the last few weeks typically proceeds a big move in the markets. Now with quarterly options expiration behind us and a big Fed meeting coming up this week, it wouldn’t be a complete surprise to see markets make that big move this week.”
The S&P made the move we were expecting but to the downside, unfortunately. The index broke its support at 4400 as the 10-year broke out of its range above 4.33%. This came following the Fed meeting, as they reiterated their “higher for longer” narrative. The dot plot was even adjusted removing 2 of the 4 interest rate cuts that were previously forecasted for next year.
While Chairman Powell has to remain hawkish with his rhetoric, he did use the phrase “proceed carefully” numerous times. This tells me that the Fed is now starting to be cognizant of the lags and the costs that come with overtightening.
This week, we will get the PCE report which is the preferred inflation gauge for the Fed. As inflation remains the culprit, this report is likely to have a big impact on interest rates. A hotter than expected number could really send shockwaves through the markets, while a cooler number could put this rally back on track.
From a technical standpoint, watch the 4300 level to the downside. It really needs to hold there to avoid falling all the way to the 200-day moving average. On the flipside, if it reclaim 4400 as that would be a very bullish signal going into the fourth quarter.
In the meantime be prepared for all outcomes. If you have any questions or need help with anything, please contact me today.
Until next time,
Chief Financial Strategist
Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.