S&P500 Forecast: Indices Pull Back Toward 50-Day MA as Traders Lock in Gains

S&P 500 Pulls Back After Run to Highs as Traders Eye Fed Cuts

Well, the S&P 500 finally took a breather today. After tagging a new high at 6523.00 earlier this week, the index pulled back just a touch—down 0.78% to close around 6466.75. That’s nothing dramatic, more like the market working off some of the excess after a strong August run. Tech led the way lower, with Dell sliding more than 9% on soft guidance despite beating on earnings.

Is the Inflation Data Keeping the Fed in Play?

The PCE report landed right on the screws—headline and core both in line with expectations. Nothing to scare the bulls, but nothing to excite them either. Year-over-year core holding steady at 2.6% keeps the Fed in the game, and traders are still pricing in a rate cut in September with 89% odds, slightly up from earlier in the week.

Even with yields creeping up today (10-year at 4.23%), the bigger picture still shows the 2-year yield down 32 bps this month. That’s a dovish signal if you ask me.

Are Traders Locking In Gains or Just Letting Off Steam?

Feels like a bit of both. After a strong multi-week push, some sellers are testing nerves, especially up near the ceiling at 6523.00. But again, buyers stepping in on dips hasn’t gone away—yet. The fact that we’re still holding comfortably above the 50-day SMA (currently around 6350.00) tells me this pullback is more about digestion than reversal, at least for now.

Names like NeoGenomics and Ambarella popped big on news, while Affirm and Ulta gave traders reasons to stay bullish on the consumer. On the flip side, Dell and Caterpillar took some steam out of the rally. But sector rotation is still alive and well.

Does the Rally Still Have Legs?

That’s the million-dollar question. Technically speaking, 6523.00 is now the level to clear if this market wants to squeeze higher. On the downside, 6430.75 and the 50-day around 6350.00 look like the near-term support zones. If those start to crack, we could see more profit-taking.

But more likely than not, the market wants to believe the Fed is on pause and cuts are coming. With Labor Day on deck and major indexes still up for the month, I wouldn’t be shocked to see things quiet down into the long weekend.

That being said, next week will be key—with ISM, jobless claims, and payrolls all lined up. If those numbers stay soft, bulls might get their breakout. If not, we could spend more time chopping around these levels.

Time will tell.

More Information in our Economic Calendar.