The S&P 500 remains under pressure as Fed tightening risk caps the upside; data in focus
FUNDAMENTAL OVERVIEW
The S&P 500 has been under pressure since the last FOMC meeting as the Fed delivered a hawkish surprise via the dot plot. In fact, the median dot showed one rate hike this year and some of those hawkish members pencilled in multiple hikes (the consensus was looking for no cuts or hikes this year). By projecting a rate hike, the Fed effectively adopted a tightening bias in the short-term.
The market increased rate hike bets immediately with now 36 bps of tightening priced in by year-end. There's a 34% chance of a hike already in July and 68% probability of a move in September.
The signal is that the Fed is finally looking to deliver on its price stability mandate and bring inflation back to the 2% target that it’s been missing since 2021. If the data says they need to hike, they will.
With the Fed's tightening bias, it's going to be harder for the stock market to rally as hard as it did in the past two months (the risk/reward is skewed to the downside). At best, I expect prices to stay in a wide range, at worst, a correction to January 2026 levels.
For some decent bullish momentum, the S&P 500 will need soft US data in the next weeks to trigger a dovish repricing that pushes real yields and the US dollar lower, effectively easing financial conditions in the short-term. Upside surprises in the data, on the other hand, will likely put more downward pressure on the stock market.
S&P 500 TECHNICAL ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can see the S&P 500 is still trading around the gap that was created after the weekend following the US-Iran deal. We might see more rangebound price action going forward unless the US inflation data starts surprising to the downside leading to a dovish repricing in interest rate expectations. There’s not much we can glean from this timeframe, so we need to zoom in to see some more details.
S&P 500 TECHNICAL ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, we have a downward trendline defining the bearish structure. If we get a pullback into the trendline, we can expect the sellers to lean on it with a defined risk above it to position for a drop into the 7,200 support. The buyers, on the other hand, will want to see the price breaking higher to increase the bullish bets into the 7,650 resistance targeting new record highs.
S&P 500 TECHNICAL ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, we can see the price is consolidating in a tight range between the 7,410 support and 7,495 resistance. The market participants will likely continue to play the range by buying at support and selling at resistance until we get a breakout on either side. The red lines define the average daily range for today.
UPCOMING CATALYSTS
Today, we get the US Jobless Claims data and the US PCE report. Tomorrow, we conclude the week with the final University of Michigan consumer sentiment survey.
This article was written by Giuseppe Dellamotta at investinglive.com.提供 MainLink：Investinglive RSS Breaking News Feed
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