S&P 500 Dips as Payrolls Surge Revives Rate Hike Bets; CPI Next

FUNDAMENTAL OVERVIEW

The S&P 500 gave back part of the gains it notched on Thursday after the US NFP report on Friday revealed that job growth in August was nearly three times the 56K consensus estimate. That led to a hawkish shift in interest rate expectations, with the probability of a September rate hike rising to about 58%.

The focus this week is on the US CPI figures. Unless there is an unexpected development in US-Iran relations, price action is expected to stay largely rangebound or slightly negative, with traders possibly beginning to hedge ahead of the CPI report. Additionally, there is still scope to unwind the gains sparked by Fed Governor Waller, so sellers are likely to maintain control leading up to the CPI.

A CPI reading that is soft or in line with expectations could lift the S&P 500, given that Fed Governor Waller has said he would not consider a rate hike unless the CPI comes in hot. On the other hand, an upside surprise in core monthly inflation would probably spark a selloff due to additional hawkish repricing.

S&P 500 Technical Analysis – Daily Timeframe

The S&P 500 eventually rebounded near the 7,640 support level and wiped out nearly all of the losses tied to the Warsh comments. Should the index pull back again to that support, buyers are likely to enter with a clearly defined risk below it, aiming for a climb to new all-time highs. Sellers, however, would like to see a break lower to add to short positions targeting a decline to the lower trendline around 7,400.

S&P 500 Technical Analysis – 4 Hour Timeframe

S&P 500 Technical Analysis – 1 Hour Timeframe

On the one-hour chart, a minor support zone exists around 7,710, where selling pressure eased and the price consolidated. Sellers aim for a break below this support to extend the decline toward the 7,640 support next. The red lines mark the average daily range for the current session.

UPCOMING CATALYSTS

On Thursday, the US Producer Price Index (PPI) report and weekly jobless claims data are due. On Friday, the week ends with the US CPI report.