Higher-than-expected CPI reading for August from the United States triggered a bloodbath on Wall Street yesterday. While headline gauge showed deceleration from 8.5 to 8.3% YoY (exp. 8.1% YoY), core measure continued to increase - this time from 5.9 to 6.3% (exp. 6.1% YoY). Major US indices finished the day 4-5% lower as market odds for a 100 basis point rate hike at the FOMC meeting next week spiked. Market currently sees 38% chance for a 100 bp rate hike and 62% chance of 75 bp move compared to 94% chance of 75 bp rate hike and 6% chance of 50 bp move on Tuesday. However, it should be noted that Fed members stressed in the days ahead of CPI data for August that regardless of what the print would be, it won't have an impact on Fed decision next week.
All 24 industry groups from the S&P 500 index finished yesterday's trading lower. Chip stocks, retailers and media companies performed the worst with each of those industry group indices dropping 6% or more. Consumer staples, energy stocks and utilities were "outperformers" but even in those cases declines exceeded 2%.
Taking a look at the US500 chart at H4 interval from a technical point of view, we can see that yesterday's reversal occurred following a test of the 23.6% retracement of the upward impulse launched in mid-June 2022. Index pulled back below the 200-period moving average (purple line) and continued to slump further. Sell-off was halted at the support zone ranging between 61.8% retracement and 3,920 pts mark. Index is trying to recover today. The first target to watch in case rebound continues can be found in the 3,980 pts area, marked with 50% retracement and 50-period moving average (green line).
Source: xStation5
