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S&P 500 Cools from Premarket Highs as Traders Brace for Major Event Risk

S&P 500 Cools from Premarket Highs as Traders Brace for Major Event Risk

Brendan Fagan, Contributor


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S&P 500 – Talking Points

  • S&P 500 fades from session high of 4168 down to 4120
  • Economic calendar dotted with several high-impact risk events
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The S&P 500 eased off session highs following the opening bell in New York, with rising US Treasury yields pressuring strong overnight gains. Stocks do remain higher in a choppy session, with tech names doing the heavy lifting. 9 of the 11 sectors of the S&P 500 are in the green, with consumer discretionary leading the way as of lunch-time. Monday’s session saw a new-look Amazon hit the market, following a 20:1 stock split that was announced back in March. Sentiment was strong in the overnight session as China showed signs of easing restrictions in Beijing and Shanghai following the country’s most significant Covid outbreak in 2 years.

Despite strong premarket gains, the S&P 500 was unable to trade up to a descending trendline that has marked the swing-highs of the last two rallies. Price turned lower just below 4170, shedding more than 60 points in the pullback. Despite the early-morning rout, price was able to reclaim the key 4120 level. Should this hold throughout the afternoon, we may get some buying back into the 4160 area.

From a broader perspective, the index remains constrained to a tight range between 4080 and 4180. We see a series of lower swing-highs over the last few weeks, which may indicate bulls are losing conviction to take us higher. We are now in the blackout period for the Federal Reserve, meaning market participants cannot rely on any additional Fedspeak ahead of the June policy meeting. With markets firmly pricing in 50 basis points for the June FOMC meeting, a sudden move in risk could come as a result of a surprise in one of the many other major risk events that dot the near-term calendar.

S&P 500 Futures (ES) 1 Hour Chart

Chart created with TradingView

The Reserve Bank of Australia will kick of the busy June period for risk events. With the central bank expected to hike once again, the RBA will set the stage for arguably the most important European Central Bank meeting of the last decade. The ECB’s decision and justification to move off of negative rates will be watched closely, as inflation and growth concerns are paramount across the continent.

Friday sees the release of US CPI data, which will be the cherry on top of an extremely busy week for traders. Should the report come in hotter than expected, markets may swing wildly as traders will look to price in more aggressive Fed action later into the year. Risk had noticeably rallied throughout last week as traders ran with comments from Atlanta Fed President Raphael Bostic, who said the Fed could pause in September to “assess” the stance of monetary policy. Bostic is notable a non-voter this year on the FOMC, and voting members Waller and Brainard were quick to walk these comments back, indicating that September remains a live meeting unless inflation shows clear signs of cooling.

Economic Calendar (High Impact Events)

Courtesy of the DailyFX Economic Calendar

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--- Written by Brendan Fagan, Intern

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

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.