Wednesday's Close

E-mini S&P 500 (September): Settled at 4472, up 37.25

E-mini Nasdaq-100 (September): Settled at 15,496.50, up 116.75

U.S. benchmarks rebounded yesterday from a week’s worth of orderly selling. Like clockwork, as it is each month, the selling came in front of Week 3 options expiration, in this case quadruple witching, and the S&P tested into the 50-day moving average. Bringing added support was the gap from August 20th. Was yesterday’s strength the next step in the playbook, a rebound that sets course for new record highs? Or was the selling too orderly, leaving unfinished business?

Next week’s Fed meeting and deadlines in Washington are also at the forefront. Yesterday, the House Ways and Means committee approved $2.1 trillion worth of new taxes. However, President Biden’s $4 trillion spending bill has hit a snag as Democrats argue over issues ranging from taxes to healthcare. 

At the same time, we’ve argued for the last 2 months the Federal Reserve has had the opportunity to announce a taper. Given their patience in the face of opportunistic conditions, if Washington doesn’t make progress before next Wednesday’s policy announcement, it likely gives credence to the Fed’s continued patience. 

Despite the miss on August job growth earlier this month, expectations are mounting for a strong September. However, this is happening as headline CPI data earlier this week arguably supports the transitory narrative. 

Of course, there are now fears of a growth slowdown and this led us into today’s slate of August Retail Sales, fresh September Philly Fed Manufacturing, and Weekly Jobless Claims. The slowdown didn’t show in yesterday’s fresh September NY Empire State Manufacturing, nor did it in today’s slate. Retail Sales and Philly Fed Manufacturing both handedly topped expectations. However, although Jobless Claims did increase from last week’s pandemic low of 312,000 to 332,000, it was still the second-best behind last week.

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