FOMC Drags Market Back Lower

The S&P 500 futures exhibited a tight consolidation pattern during the overnight session, which established a range-bound tone for the day ahead of the Federal Open Market Committee (FOMC) meeting scheduled at 2 p.m. Eastern time. The index held steady at the critical psychological level of 4,000 overnight, which helped to curb the losses from the previous day. However, the market failed to make any significant progress above this level. During the pre-market trading session, the highest point reached was around 4,020, and the market struggled to surpass this level throughout the entire cash session.

At the opening bell, the S&P 500 futures experienced a small upward push after holding steady at the 4,000 level, which drove the index closer to the pre-market high. However, the buying volume was insufficient to propel the market any higher, causing it to remain within the range established pre-market. As the pre-market high proved to be an obstacle, selling pressure mounted, and the indexes began to roll over.

As the selling pressure was intensifying, it gradually dissipated after the market reached the psychological level of 4,000 and the 50-day simple moving average (SMA) at 3,996.5. Although the price briefly dropped below 4,100, there was no further downward momentum as the market resumed its upward movement ahead of the FOMC meeting. Notably, the low volume of price action and trading activities leading into the FOMC meeting was what propelled the market upward rather than a surplus of buying activities across the market.

FOMC Brings Typical Volatility and Movement 

Following the release of the FOMC’s press notes, the market witnessed a brief spike, but this was soon followed by an increase in selling volume, particularly as quotes from the notes hit the news sources. One particular sentence that caused the market to witness more downside was, “A few officials favored or could have backed a 50 basis point hike.” This news led to a decline in the market as it implied that the Federal Reserve (Fed) was not yet done with rate hikes.

The market experienced another downward push that caused the S&P 500 futures to drop below the 4,100 level, which was sustained until the end of the trading session. With the 4,000 level now serving as the new critical threshold, the market will need to rally significantly to become less vulnerable. If the S&P 500 futures remain below the 4,000 level tomorrow, the market will remain exposed, and there could be another potential decline in the next leg.

Levels to Watch For to End the Week

Significant levels to the downside include the 200-day simple moving average (SMA) at 3,950.5 and the next macro psychological level of 3,900.

On the upside, if the market can clear 4,000 and hold, a push toward the 21-day exponential moving average (EMA) at 4,081 becomes viable. 

NVDA Earnings

Nvidia (NVDA) just released its earnings for the fourth quarter of 2022. There was a strong push higher as they announced they beat their Earnings-Per-Share (EPS). Expected EPX was $0.81 and it came in at $0.88. Another area of growth came from their revenue, also beating expectations. The revenue numbers came out to be $6.05B and the expected was $6.02B. The combination of positive news caused NVDA to spike over 7% in the after hours session. NVDA is heavily weighted in the Nasdaq and the semiconductor space. It is common for NVDA to move other semiconductor names along with it after their reportings; with two sessions left this week, it may happen again. 

Slow Bleed Continues After FOMC

The Nasdaq and the S&P 500 were negative to close the session. The S&P 500 futures closed down 0.13%, losing 7 points, while the Nasdaq futures closed down 0.20%, falling 24 points. The Dow Jones futures followed, closing down 0.19%, a loss of 65 points.