S&P 500 stages rally but fails at key 3900 area. Traders continue to ponder potential of 100 bps.
Equities remain in negative territory after a strong morning push, as the S&P 500 failed to reclaim the key 3900 area. Stocks opened lower as overnight markets were cautious ahead of this week’s slate of central bank meetings. Wednesday takes centerstage with thepolicy meeting, followed by the Bank of England and Bank of Japan later this week. Traders have been pushing to price in the possibility of a 100 basis point hike from the Fed this week following the hot August CPI print.
Geopolitical tensions also remain in focus, as President Biden indicated in an interview Sunday evening that the US would come to Taiwan’s defense during any hostile invasion. While these comments have since been walked back by the White House, hostilities between China, Russia, and the West remain in focus.
Ahead of the Fed, traders should remain wary of being long risk in the current environment. As was the mantra on the way up, the saying “don’t fight the Fed” holds true on the downside as the central bank embarks on its aggressive QT campaign. While markets may occasionally squeeze higher as a result of positioning, it appears we remain far away from an environment where investors can safely “buy the dip.
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