The S&P 500 Backs Off Its Record High in Week 2 of September 2018

The S&P 500 (Index: SPX) declined during the second week of September 2018, where the prospects for escalating interest rates in the U.S. and for tariffs to negatively impact the earnings of the S&P 500′s largest component closed the week on a low note.

While news related to the increased likelihood of rate hikes continuing longer than had previously been expected was spread out over the week, the trade news was concentrated on Friday, where ZeroHedge captured the negative sentiment from the market’s reactions to the day’s trade-related news the way that only the Tylers can.

And yet, the damage to the overall S&P 500 wasn’t as bad as it could have been, with the magnitude of the daily negative changes falling well within the market’s typical day-to-day volatility.

Unless something changes dramatically before the end of Tuesday, 11 September 2018, the redzone forecast that we first introduced back on 13 August 2018 is set to expire without the trajectory of the S&P 500′s daily closing value having fallen anywhere outside of it while it ran.

When it does expire, we anticipate that the level of the S&P will be consistent with investors looking forward to the future quarter of 2019-Q1. At least, in the absence of a news or noise event that might prompt them to suddenly focus on another point of time in the future and the expectations associated with it as they go about setting current day stock prices.

As for what might influence investors to shift their forward-looking focus, here are examples of kinds of things that we look for from the news of the Labor Day holiday-shortened second week of September 2018.

Tuesday, 4 September 2018

• Oil steady ahead of Storm Gordon; weighed by dollar, Cushing build
• Amazon touches $1 trillion, on pace to overtake Apple
• Facebook, Nike drag Wall Street lower; trade concerns linger

• Facebook shares fall after downgrade on ‘toxic brew’ of slowing sales growth and regulation risk
• Nike shares dip as Kaepernick ad spurs boycott

Wednesday, 5 September 2018

• Oil falls more than 1 percent as storm fears ease, demand concerns mount
• Fed’s Bullard makes case again for halting interest rate rises

• Fed’s Bullard says timely to reassess balance sheet size

Nasdaq falls as U.S. lawmakers grill Facebook, Twitter executives

Thursday, 6 September 2018

• Fed likely to need to hike rates ‘a bit beyond neutral’: Evans

• NY Fed’s Williams says economy ‘as good as it gets’ for U.S. central bank
• Possible yield curve inversion not deciding factor in rate debate: Fed’s Williams
• Fed’s Rosengren calls for better ammunition for downturns

Meanwhile, some QE hobbles on… U.S. Fed buys $1.8 billion of mortgage bonds, sells none

Trade jitters and tech woes weigh on S&P, Nasdaq

Friday, 7 September 2018

• Oil falls with weaker equities, stronger dollar
• U.S. job growth surges; annual wage growth largest since 2009
• Cleveland Fed’s Mester: Wage bump signals Fed, economy on track

• Fed’s Loretta Mester Says Strong Economy Supports Further Rate Hikes
• Fed’s Kaplan sees 2019 as decision time on rate hike path
• Fed’s Kaplan: too early to decide when to end rate hikes

Wall Street drops on tariff worries, with Apple in crosshairs

• Trump says has tariffs ready for further $267 billion worth of Chinese imports
• Apple says proposed tariffs to hit a range of products

Meanwhile, the week’s trade data and President Trump’s threats of new tariffs both made the negative side of the ledger in Barry Ritholtz’s succinct summary of the positives and negatives in the week’s broader news of the economy and markets.