After Friday’s gap down on the S&P 500, markets have been trying to claw their way back—but Thursday’s price action looked like a failed attempt to fill that gap.
Given the current risk landscape and the outsized gains over the past four months, we believe a deeper pullback is not only possible but warranted. Historically, August and September tend to be weaker months for equities, and we're already seeing signs that this seasonal pattern may be taking shape.
💼 Earnings Recap: Strong Results, Tepid Reactions
This week’s primary focus was on earnings, and so far, the numbers have impressed:
82% of companies have beaten their earnings estimates
We're tracking toward a 10.2% year-over-year increase for the quarter
However, as we’ve been noting for weeks, the market’s reaction to these solid earnings has been underwhelming. Investors appear more focused on macroeconomic concerns than individual company beats.
📉 Economic Concerns: Rate Cuts, Stagflation, and Inflation Ahead
Looking at the macro picture:
A rate cut is expected at the September Fed meeting
But stagflation worries are growing louder
The ISM Services Index came in below expectations and is now hovering near contraction territory. At the same time, the New York Fed’s survey showed both 1-year and 5-year inflation expectations have ticked higher.
We’ll get more clarity next week when inflation data drops.
🔍 Inflation Preview:
Core CPI (MoM): Expected to rise 0.3%
Core CPI (YoY): Projected at 3.0%
Headline CPI (MoM): Expected to slow to 0.2%,
Headline CPI (YoY): Forecast to tick up to 2.8%
📅 Looking Ahead: Key Economic Data Releases
Tuesday, August 13
NFIB Small Business Index
Consumer Price Index (CPI)
Treasury Budget
Thursday, August 15
Initial Jobless Claims
Producer Price Index (PPI)
Friday, August 16
Retail Sales Report
🔮 Market Outlook: Will Data Trigger the Next Leg Down?
The big question: Will inflation and retail sales data be enough to keep the market from moving lower?
We’ll see soon enough. But from our view, we’re preparing for a potential 3–7% pullback in the S&P 500, possibly down to the 200-day moving average around 5900. There may be a reset opportunity at the February highs, which aligns closely with the 50-day moving average.
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— HPK Provident Advisors
Disclaimer: The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. Economic forecasts may not develop as predicted.