S&P 500 Heads Down As 2023-Q3 Ends
The S&P 500 (Index: SPX) dropped 0.7% from its previous week's close, to end the third calendar quarter of 2023 at 4288.05.
The main reason the market fell during the final week of 2023-Q3 is the developing consensus the Federal Reserve will hold interest rates higher for longer because inflation has not yet been adequately suppressed.
We looked for signs a looming shutdown of nonessential federal government operations at the end of its fiscal year was negatively impacting stock prices, but given the long-running dysfunctionality of Washington, D.C., news related to this year's looming shutdown contributed imperceptible levels of noise to the trajectory of stock prices. The past week's news related to the looming shutdown has not affected stock prices in any meaningful way.
Speaking of which, the trajectory of the S&P 500 remains well within the latest redzone forecast range shown on the dividend futures-based model's alternature futures chart, though trending down into the lower portion of it.
The trajectory of the latest redzone forecast range itself has similarly altered its trajectory downward since we first introduced it several weeks ago, coinciding with rising expectations the Fed will hold interest rates higher for longer than investors were expecting when we first drafted it.
Looking forward, we'll update this chart one last time before rolling out a first look at the alternative futures chart for 2023-Q4, which will take us through the end of the year.
Here's our recap of the meaningful market moving news headlines for the final week of 2023-Q3:
Monday, 25 September 2023
- Signs and portents for the U.S. economy:
- Traders calling foul on Fed minions' bluff, Fed minions may have added to financial instability, suggest they may seek another rate hike:
- Bigger trouble, stimulus developing in China:
- Bigger stimulus developing in Japan, BOJ minions
- ECB minions thinking about sitting on their hands again:
- Wall Street posts gains as investors eye rate outlook
Tuesday, 26 September 2023
- Signs and portents for the U.S. economy:
- Most dovish Fed minion says betting odds of higher rates are rising:
- Signs China's stimulus efforts are getting traction:
- BOJ minions to keep never-ending stimulus alive longer:
- Bigger trouble developing in Eurozone:
- Wall St pounded as investors grapple with higher rates
Wednesday, 27 September 2023
- Signs and portents for the U.S. economy:
- Fed minion says they don't think they've beaten inflation yet, BofA CEO says they have, Reuters mouthpiece says they need to move goalposts to accept higher inflation:
- "Precise, forceful" stimulus developing in China:
- BOJ minions becoming less sure about keeping never-endng stimulus policy alive:
- ECB minions claim they may not be done with rate hikes, excited to shrink money supply:
- S&P 500 ekes out slim gain as investors weigh elevated yields
Thursday, 28 September 2023
- Signs and portents for the U.S. economy:
- Fed minions say they're not sure what way they'll go with rate hikes:
- Signs of stimulus getting traction in China:
- Bigger trouble developing in the Eurozone:
- Wall St ends higher as investors digest economic data ahead of inflation report
Friday, 29 September 2023
- Signs and portents for the U.S. economy:
- Fed minions keep playing "will they or won't they" on rate hikes:
- BOJ minions told to keep deflation from coming back:
- ECB minions get good news and bad news:
- S&P 500 dips after US inflation data, ending weak third quarter
The CME Group's FedWatch Tool continues to project the Fed will hold the Federal Funds Rate steady in a target range of 5.25-5.50% through July (2024-Q3). Starting from 31 July (2024-Q3), investors expect deteriorating economic conditions will force the Fed to start a series of quarter point rate cuts at six-to-twelve-week intervals through the end of 2024.
The Atlanta Fed's GDPNow tool's forecast of annualized real growth rate during 2023-Q3 held steady for a second consective at +4.9%.
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