S&P 500 (SPY) Dives Below The 4000 Level

S&P 500 Continues to Face Serious Pressure

After the CB Consumer Confidence survey exceeded analyst estimates, the S&P 500 index continued to trend downward and dropped below the 4000 mark.

Good news is now terrible news for markets as robust consumer activity raises the possibility of a hefty rate rise at the next Fed meeting.

Another catalyst has to be properly monitored. The Fed will intensify its policy of quantitative tightening in September. The Fed will trim $35 billion in mortgage-backed securities and $60 billion in Treasury bonds off its balance sheet each month. The Fed will allow them to develop rather than selling them.

The Fed's balance sheet is already starting to shrink. The rate of this decline was moderate, however. Markets will have less liquidity starting in September, which might act as another negative driver for equities.

Recently, the S&P 500 was able to break through the 4000 mark, and it is now attempting to gather further downward momentum. It's interesting to note that the RSI is still in the moderate range, indicating that there is still plenty of opportunity for momentum to build should the proper catalysts materialize. Since the S&P 500 went from 4200 to 4000 in only three trading sessions, investors should prepare for severe volatility.

Energy Stocks Are Leading The Drop

A significant sell-off in energy equities has occurred today as WTI oil is down by around 6%. Leading energy companies Exxon Mobil, Chevron, Schlumberger, and others are down 3–4% today.

In the midst of a massive sell-off in the commodities markets, basic materials equities are also under significant pressure. For instance, Freeport-McMoRan, the largest producer of copper, is down nearly 6% today.

Also falling are tech stock prices. Today, all of the top tech companies, including Apple, Microsoft, and Alphabet, are losing momentum. Given the pressure on all market areas, there is nowhere to go.

However, the market does have some promising areas. Big Lots, a bargain retailer, is up more than 7% after an earnings report that was stronger than anticipated. Given that the price of Big Lots has been under pressure for some months, the response to the news is a normal relief rally since the company's performance was not as poor as anticipated.

The stock of Avid Technology has increased by almost 12% since it was included to the S&P 500 SmallCap 600 index. Being included to an index is always a good thing since it compels index funds to purchase the stock.

Traders are concerned that an aggressive Fed may impede economic development in the long run. Stocks will continue to see pressure if these concerns linger.