S&P 500 halts multi-session decline, but fails at 4160 again. Traders eagerly await PCE data, Fed’s Powell. USD strength, higher yields undermine equity bid.
may see Chair Powell alter his tone slightly, should he feel that recent rate hikes are starting to filter their way through to the broader economy. There is often a lag associated with monetary policy, but if Chair Powell indicates that the economy and demand are slowing to the Fed’s liking, market participants may feel that a pivot or pause is closer than previously thought.
Any talk of a recession from Powell may weigh heavily on equities, as forecasts for the US consumer and corporate earnings may get slashed if the Fed feels storm clouds are approaching. Whether a soft landing can be achieved is yet to be seen, but traders are currently buying what the Fed is selling. So long as inflation expectations remain anchored, Jerome Powell and co. may not feel the need to upset the apple cart too much when it comes to risk assets.
On a soft PCE print and/or a dovish Powell, ES may look to prior support at 4200 as near-term resistance. If the market’s aggressive pricing of Fed policy is talked down, price may squeeze higher toward the rejection zone at 4300. Downside momentum may gain speed however if Chair Powell reinforces his desire for tighter financial conditions, potentially even restrictive policy into year-end.
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