S&P 500, Nasdaq 100 – Talking Points
- Stocks ease from overnight highs as US traders return to their desks
- Powell, Brainard set to speak as Fedspeak remains in focus
- ECB meeting may do little to stem USD strength
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US equity markets remain choppy following the opening bell as traders jostle ahead of major event risk later this week. Market participants will be looking to comments from Fed Chair Jerome Powell and Vice Chair Lael Brainard later this week along with a key interest rate decision from the European Central Bank (ECB).
Comments from Federal Reserve officials will be key in shaping the tone into the FOMC policy meeting later this month. Fresh commentary as well as next week’s CPI print may be a cause for increased market volatility as the debate still rages over whether the Fed will go 50 or 75 basis points.
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S&P 500 futures (ES) were muted during the Monday session with US traders offline for the Labor Day holiday. Overnight gains were capped by the 3964 level as price slowly gravitated lower into the opening bell in New York. Price has been testing the 0.382 fib retracement of the advance off of the June lows, with each dip into 3900 getting bought up.
Risk appears heavy here, with rips getting sold while data weakens globally. As was the way on the way up, it remains wise to not “fight the Fed” on the way down as quantitative tightening (QT) ramps up to full speed this month. With QT being an unknown variable at this moment, heightened interest rate volatility could push equity markets lower. Should the 3900 zone break, major fib support around 3800 may offer some support for sinking prices.
S&P 500 Futures (ES) 1 Hour Chart
Chart created with TradingView
Nasdaq 100 futures (NQ) fall into the same boat as ES, given the tech dependence and overlap of the two. NQ was able to crawl above 12200 during the overnight session, but the advance was firmly rejected with sellers taking price as low as 11930. As Treasury yields continue to rise, the outlook for the tech index appears weak. Should psychological support at 12000 fail, price could sink as far as the support zone around 11500. If Chair Powell remains as hawkish this week as he was at Jackson Hole, high-beta tech stocks could bear the brunt of another cascade in risk assets.
Nasdaq 100 Futures (NQ) 1 Hour Chart
Chart created with TradingView
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— Written by Brendan Fagan
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