CPI/SPX Outlook is generally favorable following aggressive Fed comments last week. The post-FOMC speakers tour picks up this week with aggregate comments likely to sound less hawkish than Powell’s press conference last Wednesday
Near-term SPX is heavily dependent on terminal Fed Rate expectations, which rose into and out of Wednesday’s Fed meeting.
Catalysts ahead, including tomorrow’s Jobs Report, will likely impact terminal rate expectations, bond yields and equity markets.
It is fairly quiet ahead of today’s Fed Meeting (11am PT) and press conference (11:30am). The most likely outcome is a 75bp rate hike with no guidance on December so the Fed can to maintain optionality into 2023.
Catalysts ahead include Tomorrow’s Fed meeting, Friday’s Jobs Report and next Thursday’s CPI print.
Fed scenarios going into Wednesday’s Fed meeting lean equity friendly. Rate hike expectations range from 50bp to 100bp with 75bp the most likely outcome.
Cross markets provide support for equities, which are higher and near best levels with the S&P 500 on track for a 3% weekly gain.
Crude prices in focus as US equities are narrowly mixed, with Energy, Industrials and Financials upside standouts.
US equities are mostly lower with Health Care, Energy and Materials outperforming, while Communication Services (GOOGL) and Tech (MSFT) retreat. Treasury yields are lower with curve flattening.
Terminal Fed rate expectations (implied in the OIS forward curve) have been the dominant driver for equities since April/May.
