Friday's Market Minute: Snap Back to Reality

The broad market is on a knife edge, and both the stock and bond markets suggest financial conditions are much tighter. A tradable relief rally bottom may be forming, or fresh yearly lows may be in the works.

The S&P 500 has retested the June lows of 3,630, but has yet to close below that important technical level. Risk assets won’t have a meaningful rally or a major trend reversal above the 200-day moving average if the economy continues to show resilience while inflation continues to be significantly above the Fed Funds rate.

The most important question facing investors is when the Federal Reserve will stop raising interest rates. Inflation is still stubbornly high, and the labor market remains resilient. The weekly unemployment claims report showed initial claims fell to their lowest level in just over two months in mid-September.

This raises the risk that the unemployment rate will drop this month, keeping the Fed on its aggressive monetary policy tightening course of action. A move up in unemployment or a move down in wage growth would strongly suggest inflation is poised to fall. Unfortunately, employment is a lagging indicator, and it won’t ease off until economic activity is in clear decline.

This post contains sponsored advertising content. This content is for informational purposes only and not intended to be investing advice.
Image sourced from Shutterstock