Morning Notes

The S&P 500 (SPX) has extended beyond the upper-end of technical resistance at 4100, despite a still challenging fundamental and macro backdrop.

Catalysts ahead include mega-cap earnings this afternoon and tomorrow’s Jobs Report, all of which will likely have a material impact on markets.

Monetary factors are at the center of the current market narrative, with equity upside yesterday driven by a weaker-than-expected Employment Cost Index and positioning ahead of today’s Fed meeting.

A 25bp rate hike tomorrow is already priced into the OIS forward market along with 25bp expected in March before a pause.

China reopening optimism and expectations for an imminent Fed pause have combined to form an emerging ‘soft-landing’ scenario often cited as the driver of year-to-date gains.

At 4025, the S&P 500 (SPX) is currently trading above its 50, 100, 200 day moving averages and above the downward sloping trend channel that contained the bear market all of last year.

The S&P 500 (SPX) was unable to hold key momentum levels earlier in the week after weaker-than-expected data challenged the soft-landing narrative.

We may be entering a new phase as the disinflation narrative is now consensus and a still-hawkish Fed drives concerns for a hard landing.

Bonds and stocks have been positively correlated over the last 12 months, and today’s bifurcation may reflect growing concerns for a deeper economic slowdown in the months ahead.

The S&P 500 outlook is in focus as the index has gained over 4% to start the year and is now trading above its 50, 100 and 200-day moving averages.