S&P pulls back from resistance

12 oct. 2023

Earlier today we got the latest update on US inflation in the form of the Consumer Price Index (CPI). Looking at the year-on-year data, Core CPI, which excludes food and energy, came in at +4.1%, as expected, and below last month’s reading of +4.3%. This means that the downward trend in Core inflation since September last year, continues. As far as Headline CPI is concerned, this was unchanged from last month at +3.7%, and was a tad higher than the +3.6% expected. Headline CPI hit a low of +3.0% in June, from a peak of +9.1% one year earlier. But since then it has picked up, thanks to continued increases in food and energy.

The mixed inflation data followed on from yesterday’s unexpectedly strong wholesale inflation data. The latter had been shrugged off by traders, and buying pressure saw the S&P 500 attempt to break above 4,400 but failed at its first attempt. But today’s news led to a rebound in bond yields and a sell-off across US stock indices.

While the S&P remains within the upwardly-sloping trendline, it continues to trade much closer to support than resistance. The big question is if it can find support above 4,300 or if it once again retests the lower support area of channel, around 4,250/60.