S&P 500 Tests New Highs As FOMC Minutes Show Fed May Slow The Pace Of Rate Hikes

Key Insights

• S&P 500 moves higher as FOMC Minutes show that the Fed has started to worry about the negative impact of high interest rates. 
• Energy stocks are under pressure amid a strong sell-off in oil markets. 
• A move above the resistance at 4040 will push S&P 500 towards the resistance level at 4070.

S&P 500 Gains Ground After The Release Of FOMC Minutes

S&P 500 tested daily highs near the 4030 level as traders reacted to the release of FOMC Minutes.

FOMC Minutes were somewhat dovish, which was bullish for stocks. As per FOMC Minutes, “Most respondents to the Open Market Desk’s surveys viewed a 50 basis point increase in the target range for the federal funds rate at the next December meeting as the most likely outcome.”

Importantly, some Fed members are worried that high interest rates will put too much pressure on the economy: “Some participants observed that there had been an increase in the risk that the cumulative policy restraint would exceed what was required to bring inflation back to 2 percent.”

The FedWatch Tool indicates that there is a 80.6% probability of a 50 bps hike at the next Fed meeting in December. At the start of today’s trading session, the probability of a 50 bps hike was 71.1%. The rising probability of a “moderate” rate hike is bullish for stocks.

Most market segments have been moving higher today. However, energy stocks have found themselves under pressure as WTI oil settled below the $78 level after reports indicated that the Russian oil price cap may be set in the $65 – $70 range. Schlumberger, Halliburton, and Baker Hughes were down by 3-4% in today’s trading session.

S&P 500 Is Moving Towards The Resistance At 4040

S&P 500 managed to settle above the resistance at 4015 and is trying to gain additional upside momentum. The next resistance level for S&P 500 is located at 4040. If S&P 500 climbs above this level, it will head towards the resistance at 4070. A successful test of the resistance at 4070 will open the way to the test of the next resistance level at 4100.

On the support side, the previous resisance at 4015 will serve as the first support level for S&P 500. If S&P 500 declines below this level, it will head towards the next support at 4000. A move below 4000 will push S&P 500 towards the 3960 level. If S&P 500 manages to settle below this level, it will head towards the support at 3920.

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