S&P 500 Marches Higher as Traders Prepare for Major Event Risk

S&P 500 – Talking Points

• S&P 500 slowly creeps higher toward 3900
• US CPI data on Wednesday comes into focus
• BoC rate decision, PPI, & consumer sentiment data also on tap

The S&P 500 advanced on Tuesday as traders eagerly away Wednesday’s US CPI print. Following a tough Monday session that was dominated by recession fears, equities pushed higher Tuesday with financials and materials leading the way for the S&P 500. Bank earnings kick off, which will garner significant attention. Commentary from bank CEOs on the state of the economy may set the mood as we push ahead to retail earnings later in the month, which may prove to be the catalyst for the next major move in equities. XLE, the energy sector ETF, was trading down 2% as WTI fell more than 6%.

Prior to bank earnings, equity traders will be looking to tomorrow’s US CPI print with caution. Inflation and inflation expectations have been the major driver of sentiment and price action of late. CPI is forecasted to come in at 8.8% YoY, while Core CPI is expected at 5.7%. A hot print has the potential to put more pressure on risk, as traders will increase bets on hawkish Fed policy. Wednesday also sees a Bank of Canada interest rate decision, while the rest of the week is packed with PPI and consumer sentiment releases.

Upcoming Economic Calendar (High Impact Events)

Courtesy of the DailyFX Economic Calendar

Despite the slow march higher in Tuesday’s session, S&P 500 futures (ES) could not reclaim the 3900 threshold. That area has been a decent fade zone for bears to enter fresh shorts, with each advance being rejected promptly. Price action may quiet down ahead of the major inflation data tomorrow, so we may fail to see an explosive break in either direction toward the end of the NY session. Personally, 3854 remains my pivot area in the current zone ES finds itself in. If that line in the sand can hold, price may look to eventually retest 3900 and the late-June swing high around 3950. A disappointing hot print tomorrow morning could reinvigorate bears, and couple that with recession fears and you may get a retest of support at 3756.

S&P 500 Futures 1 Hour Chart

Chart created with TradingView

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— Written by Brendan Fagan, Intern

To contact Brendan, use the comments section below or @BrendanFaganFX on Twitter