NASDAQ Index, SP500, Dow Jones Forecasts – NASDAQ Retreats As WTI Oil Soars Above $100

SP500 Moves Lower As Traders Bet On Hawkish Fed

SP500 is losing ground as traders focus on PPI report and react to the strong rally in the oil markets.

PPI increased by +0.4% month-over-month in August, in line with analyst expectations. Core PPI grew by +0.2%, while analysts expected that it would increase by +0.3%. I’d note that the previous PPI report was revised from 0% to +0.1%, while Core PPI was revised from +0.2% to +0.3%. From a big picture point of view, Producer Prices data showed that inflationary pressure was growing.

WTI oil climbed above the $102.00 level as Houthis seized a key port on the Red Sea. Houthis achieved victory over Yemen’s government forces. Their control of the port provides them with an opportunity to attack vessels going through the Bab-el-Mandeb Strait. Houthis’ move puts Saudi Arabia into an uncomfortable position and raises worries about the stability of oil exports in the region.

Meanwhile, there are no signs indicating that U.S. and Iran are ready to get back to negotiations. The Strait of Hormuz may stay closed for months, and oil markets have started to price in such a scenario.

High oil prices will push inflation higher and force the Fed to start a new rate hike cycle. FedWatch Tool indicates that there is a 73.4% probability that Fed will raise the federal funds rate at the meeting next week.

Treasury yields rallied as bond traders focused on high oil prices and bet on hawkish Fed. The yield of 2-year Treasuries settled above the 4.55% level, while the yield of 10-year Treasuries moved towards 4.95%. Rising yields put additional pressure on stocks.

Basic materials stocks were among the biggest losers today as traders focused on the sell-off in precious metals markets. Real estate stocks found themselves under pressure amid rising Treasury yields. Interestingly, energy stocks have also moved lower in today’s trading session.

SP500 pulled back below the support at 7615 – 7625 and made an attempt to settle below the 7600 level. In case SP500 settles below 7600, it will head towards the next support, which is located in the 7530 – 7540 range.

NASDAQ Is Losing Ground As Oil Markets Rally

NASDAQ moved lower as traders bet that high oil prices will trigger a start of a new rate hike cycle. Higher interest rates will raise costs for AI-related companies.

Currently, NASDAQ is trying to settle below the support level at 29,100 – 29,150. In case this attempt is successful, NASDAQ will head towards the next support, which is located in the 28,800 – 28,850 range.

Dow Jones Tests The 52,000 Level

Dow Jones is under pressure amid broad pullback in the equity markets. IBM and NVIDIA are the worst performers in the Dow Jones index today. These stocks are losing ground as traders focus on rising Treasury yields and worry about hawkish Fed.

Dow Jones pulled back below the support at 52,200 – 52,300 and declined towards the 52,000 level. If Dow Jones settles below 52,000, it will head towards the next support level at 51,500 – 51,600. I’d note that RSI is in the oversold territory, so the risks of a rebound are increasing.

For a look at all of today’s economic events, check out our economic calendar.