Trouble on the Horizon: Market Rally Stalls

Throughout the weekend, the psychological level of 3,900 on the S&P 500 futures was held and provided an early indication of upside continuation. As soon as the opening bell sounded, the continuation began. The Nasdaq has again led the charge higher, as the Dow Jones failed to show the strength to keep up, with bank earnings starting Friday. Around earnings season, it is common to see a related index struggle to find a direction, which was the case with the Dow Jones. 

The market experienced a steady climb thanks to a consistent influx of buying pressure. However, just when it seemed like the upward trend would continue, a mention from the Federal Reserve caused the rally to come to a sudden stop.

Daly’s Words Shake Up Wall Street

Mary Daly, President of the San Francisco Federal Reserve, put a halt to the market rally when she stated that “it is too soon to declare victory by stopping rate hikes.” Her comments were then followed by the revelation that Fed policymakers believe inflation is more persistent than they initially thought.

Raphael Bostic, President of the Federal Reserve Bank of Atlanta, caused more market unrest when he stated that “rates will have to stay high for a long time… well into 2024.” Bostic made it clear that he is not in favor of changing course, and the Fed as a whole seems willing to let inflation rise beyond their target rate.

These comments from Federal Reserve officials caused the market to become vulnerable after a seemingly strong rally that began last week. As a result, the indexes quickly fell beyond their low for the day and remained there for the rest of the session. The S&P 500 futures ended up close to where they were at the end of last Friday. While the psychological level of 3,900 held, there is a possibility of a bigger pullback if that level is broken.

Fed Chairman Powell Headlines in Sweden

Federal Reserve Chairman Jerome Powell is scheduled to speak in Sweden at 9 a.m. Eastern tomorrow, and the market can expect increased volatility in response to his words. Investors will be closely analyzing Powell’s tone to gauge his sentiment, and the topic of central bank independence may also influence market reactions. Powell will likely provide insight into the current state of the global and U.S. economies during the event.

Thursday’s CPI Report: What to Expect

The market may also experience heightened volatility this week due to the release of the U.S. Consumer Price Index (CPI) data on Thursday at 8:30 a.m. Eastern. The median forecast for the report suggests that it will show an improvement compared to the previous release. If the data supports this forecast, or even exceeds it, with a Core CPI (year-over-year) of 5.7% or higher, the market is likely to react positively since it would indicate an improvement in inflation.

Amid Market Struggles, Nasdaq Emerges as the Winner

The Nasdaq closed positive, whereas the S&P 500 and Dow Jones were negative to close the session. The S&P 500 closed down 0.07%, falling 3 points, while the Nasdaq closed up 0.59%, an increase of 62 points. The Dow Jones futures closed down 0.33%, declining 113 points.