Near-Term Outlook
August 4, 2025
Friday’s sell-off in the SPX slowed on its approach toward technical support in the 6140-6205 zone. The bullish trend stays firmly in place at levels above ~6200 with a sustained close below 6137 opening the door to a deeper pullback. We felt the SPX would find near-term buyers near ~6200 with the index more vulnerable (5-7% pullback) as we move into a seasonally week September-early October window. The SPX will appear more vulnerable if the current rally remains contained within last Thursday’s bearish outside day (began at 6427).
Investors look through Friday’s jobs-driven growth scare to likely policy easing at the September Fed meeting. Market-based probability for a September cut has moved to ~91% with the debate shifting to the expected size of the cut (some sell-side calls for 50bp).
Next week brings an important hurdle for rate expectations with July CPI on Tuesday and PPI on Thursday. Tariff-driven price increases should be evident, but those numbers could be partially offset by housing and non-shelter services disinflation. The September Fed meeting is scheduled for 9/17 with other major upcoming catalysts/events including minutes from the 7/30 meeting (8/20), Powell’s Jackson Hole speech (8/22), July PCE inflation (8/29), the August Jobs Report (9/5), August PPI (9/10) and August CPI (9/11).
A sub-50,000 non-farm payroll gain, and/or headline CPI print above +3.5% YoY would put recession risk back in the headlines. In our view, the risk of a recession in the near-term remains low because credit spreads are near multi-year lows and there are no large asset-liability imbalances in the current economy. Note, Fed policy easing is usually most effective when adverse credit issues aren’t present
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