S&P500: Traders Eye 7427.83 as Oil and Inflation Risks Fuel Volatility

Stocks Steady as Oil Pulls Back on Sanctions Waiver Report

The S&P 500 is holding near unchanged Monday after oil prices dropped on reports that the United States offered Iran a temporary sanctions waiver. The Dow Jones Industrial Average is up around 116 points, or 0.4 percent. The Nasdaq Composite is struggling to find direction. Records last week, hesitation Monday. The waiver report changed the tone fast.

Oil Pulled Back. Here Is Why That Matters.

Iranian media reported Monday that the United States offered Iran a temporary waiver on oil sanctions, with the waiver staying in place until both sides reach a final deal. The White House did not confirm it. That did not stop the market from reacting.

July West Texas Intermediate crude oil dropped about 1 percent to near $101 a barrel. Spot Brent crude oil slipped roughly 1 percent to around $108. Lower oil eased the inflation pressure that was sitting on stocks before the open and money rotated fast into transportation, retail, and manufacturing. Energy stocks gave back ground because that is the other side of the trade when crude drops.

What Oil Was Doing Before That Report

Before the open, June West Texas Intermediate crude oil was climbing and the concern was straightforward. The Strait of Hormuz is still mostly blocked. Global inventories are draining fast and analysts are warning stockpiles could hit record lows by the end of the month. When oil is running higher on supply fears, every business that moves product or burns fuel starts repricing costs forward. That is what kept the broader market from building on last week’s records even before the open.

Trump Added Pressure Over the Weekend

President Trump posted on Truth Social over the weekend warning Iran that time was running out and there would be nothing left if they did not move quickly on a deal. That kept traders nervous heading into Monday even after the sanctions waiver report gave the market something to work with. The way I see it, the market is trading every headline right now. One report pushes oil down. One Trump post pushes uncertainty back up. That is the environment until the Strait situation resolves.

Yields Are Still the Bigger Problem

The 10-Year U.S. Treasury yield is sitting near 4.59 percent. The 30-year is holding above 5.1 percent. Those levels are not moving on the sanctions waiver report and they are the reason the Nasdaq is flat while the Dow is managing a modest gain. Higher yields hit growth stocks because they make future earnings worth less today. They hit the Nasdaq first and hardest every time. The Dow is holding because industrials and financials do not carry the same rate sensitivity. That split is not random. It is the yield trade running exactly the way it always does.

NextEra Buys Dominion

NextEra Energy announced a nearly $67 billion all-stock deal to acquire Dominion Energy. The combined company would be the largest regulated electric utility in the world. Dominion surged almost 11 percent. NextEra fell more than 4 percent on dilution concerns. The deal is aimed squarely at the power demand coming from artificial intelligence data centers and the market read it that way. Utility stocks moved broadly higher on the announcement. Investors are still buying long-term growth themes even when the short-term picture is this uncertain.

Technical Outlook

S&P 500 Index (SPX) Technical Analysis

The S&P 500 Index is slightly higher during the first hour of trading on Monday after shedding earlier losses. The main trend is up but the two-day downswing broke a more than monthlong pattern, which suggests some liquidation pressure. The biggest concern for me is the weekly closing price reversal top, which indicates an even greater shift in sentiment.

The first minor range is 7338.54 to 7517.12. The early price action suggests traders are eyeing its pivot at 7427.83 for direction.

A sustained move under 7427.83 will signal the presence of sellers. If this creates enough downside momentum then prices could fall into a series of pivots at 7345.62, 7312.49 and 7281.84. More importantly, it could change the minor trend to down if 7338.54 fails as support.

The first leg down from a top is usually created by profit-taking. It’s the rebound rally that lets us know whether a top is actually forming. Although I see downside pressure developing, I don’t sense an urgency to get short yet. At this time, it looks as if we’re still in buy the dip mode.

Trader reaction to 7427.83 will set the tone today.

What to Watch

Oil and the 10-Year U.S. Treasury yield are the two live drivers going into the rest of the week. The sanctions waiver report eased one pressure point but nothing is confirmed and the Strait of Hormuz is still the problem. If the waiver report falls apart or Trump escalates further, oil goes back up and the inflation trade reasserts itself. Yields do the rest.

Trader reaction to 7427.83 in the S&P 500 Index sets the tone for the session. A sustained move under that level signals sellers are in control and the next support cluster sits at 7345.62, 7312.49 and 7281.84. Above it, the dip buyers are still running this market.

More Information in our Economic Calendar.