S&P 500 futures retreat 1% amid hawkish Fed rhetoric and robust data

Federal Reserve officials emphasized today that inflation remains uncomfortably high, despite a resilient economy and emerging pockets of weakness in the labor market. Market sentiment was further dampened by today’s retail sales and PPI inflation data, both of which surprised to the upside. These prints suggest a diminished inclination for imminent rate cuts. Neel Kashkari highlighted the resilience of the US economy but cautioned against the potential inflationary effects of new tariffs. Meanwhile, Raphael Bostic noted that inflation remains "far from the 2% target," while Federal Reserve Governor nominee Stephen Miran suggested that deregulation under the Trump administration could facilitate monetary easing without stoking price risks.

Key Commentary:

• Neel Kashkari: Observed that while inflation is heading in the right direction, it remains too high. He noted a "K-shaped recovery," where disparate social groups experience vastly different economic outcomes, alongside a softening labor market.

• Raphael Bostic: Asserted that inflation remains the "primary challenge" and stays significantly above target.

• Stephen Miran: Argued that deregulation will bolster growth and productivity without inflationary pressure, thereby justifying further rate cuts. He maintains there is still a window for significant easing this year.

The cumulative tone of today’s speeches suggests the Fed is in no rush to lower borrowing costs, exacerbating the sell-off on Wall Street. While a robust economy generally bodes well for corporate earnings, the banking sector has failed to impress. Following yesterday’s profit decline at JPMorgan, today brought disappointment from Bank of America and Citigroup, which are trading down by more than 5% and 4%, respectively.

Technical View: US500

The US500 is staging a significant breakout below its ascending channel today, retreating more than 1% from the 7,000-point mark. The contract has now fallen below the 38.2% Fibonacci retracement level at 6,930.

Key support is situated just above 6,900 points, a level reinforced by the 50.0% retracement of the latest impulse wave and the range of the previous correction within the broader uptrend.