S&P 500 Extends Slide as Traders Eye Economic Data, Bank Earnings

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S&P 500 sinks by 1% as traders brace for CPI on Thursday. Fedspeak remains hawkish as FOMC looks to talk down market. Bank earnings to set the tone for Q3 earnings season.

Stocks are sliding to start the week as traders remain on edge ahead of Thursday’s US CPI print. Risk assets have struggled lately as markets once again are forced to digest the prospect that a Fed pivot is not imminent. With Fed Chair Jerome Powell not changing his tune from Jackson Hole, subsequent Fedspeak has reiterated the hawkish intent of the FOMC. Equities still continue to tread water as rates and FX markets continue to flash warning signs.

This week sees a significant amount of event risk, as traders will look to navigate Thursday’s US CPI print and the first wave of corporate earnings. While the market will likely be volatile into and after CPI, the market is effectively priced for 75 basis points in November, and the bar remains extremely high for this to change. Friday sees Citi, JP Morgan, Wells Fargo, and Morgan Stanley all report earnings.

With YTD lows for ES firmly in sight, poor sentiment and continued expectations of a hawkish Fed may see ES trade down to major Fib support around 3500. As interest rate volatility remains elevated, it remains difficult to see a period in which equities can mount a sustained rally. When your rallies are caused by short covering, it is safe to say your markets are under serious pressure.

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