Market impact analysis

The soft NFP report on Friday affected risk sentiment as growth expectations decreased. The S&P 500 hit new lows but recovered most losses after Fed’s Williams expressed openness about the September meeting. Although the data wasn’t as negative as market reactions suggested, it surprised those anticipating a strong report. The market now anticipates 58 bps of easing by year-end, up from 35 bps before the NFP release.

The soft NFP report on Friday affected risk sentiment as growth expectations decreased. The S&P 500 hit new lows but recovered most losses after Fed’s Williams expressed openness about the September meeting. Although the data wasn’t as negative as market reactions suggested, it surprised those anticipating a strong report. The market now anticipates 58 bps of easing by year-end, up from 35 bps before the NFP release.

The S&P 500’s recent movements highlight the importance of technical levels in navigating the current market landscape. On the daily timeframe, the index’s pullback was prompted by a combination of a hawkish Federal Reserve outlook and softer-than-anticipated NFP data. Despite these headwinds, buyers are likely to find value around the 6,170 support level, poised to trigger a potential rally. Conversely, sellers are eyeing a break below this level in hopes of driving the market towards the 5,800 mark.

Technical analysis insights

Investors will also be keenly observing any commentary from Federal Reserve officials throughout the week, with particular attention on any hints regarding future monetary policy moves. The upcoming Jackson Hole Symposium remains a focal point, where Fed Chair Powell’s speech could provide valuable insights into the Fed’s stance on interest rate adjustments.

Lower inflation estimates from ISM Manufacturing and UMich reports suggest potential support for the stock market. Upcoming releases include ISM Services PMI and Jobless Claims data this week. If these show lower inflation and positive jobless claims results, the S&P 500 might rise to new highs, with expectations of Fed Chair Powell signaling a potential cut in September at the Jackson Hole Symposium.

The economic events calendar for the week is packed with significant data releases and events that could influence market dynamics. Market participants are particularly focused on the US ISM Services PMI set to be released tomorrow. This indicator is crucial as it provides insights into the economic health of the non-manufacturing sector, which represents a large portion of the US economy. A stronger than expected PMI reading could bolster confidence in economic growth, while a weaker figure might raise concerns about the pace of recovery.