Volatile Market Ahead Of Data-Packed Wednesday

Volatile Market Ahead Of Data-Packed Wednesday

Market sentiment has shifted heading into Wednesday with another round of outside influences.

Over the last several weeks, the market has been gaining momentum in anticipation that the Federal Reserve (Fed) would lower benchmark interest rates in December. Ongoing protests in China, hawkish Fed talk, and looming economic reports have deflated market momentum from the rally higher last week.  

Market shows early signs of chop

When the opening bell sounded today, there was indecision across the indexes, serving as an early indication of a choppy day.

When indices move in different directions, it is difficult for the overall market to move in a particular direction, as momentum requires a group effort. Looking at some of the big technology names, there is divergence within the technology sector. For example, Apple, Inc. (APPL) immediately showed signs of strength today, whereas Meta Platforms, Inc. (META) rallied. These are all early signs of chop and volatility.

When the U.S. Consumer Confidence Index report came out at 10 a.m Eastern, it slightly boosted the session as data revealed a higher-than-expected number at 100.2. Ultimately, this spurt of upside momentum fizzled quickly. The market started to roll over and triggered a significant break at a critical level, as noted in a previous Simpler Insights article:

“On the downside, 3,960 was a level that kept the market range bound over the last week, so breaking this would be significant to any downside movement. A break of 3,960 can trigger a more extensive continuation leading the market to the 15-day simple moving average (SMA) at 3,950.”

Breaching this level sent the market tumbling lower today, breaking the psychological level of 3,950. The S&P 500 futures found support and created a low of the day at 3,941. This 3,941 level will be the next significant level of support that, if broken, can send this volatile market free-falling toward the 21-day exponential moving average (EMA) at 3,926.

What to be prepared for Wednesday

To start the day, the Automatic Data Processing (ADP) national employment report is scheduled to be released at 8:15 a.m. Eastern before the cash session opens. This report is expected to be lower than the previous one, and the market is expected to view this as lackluster. However, an adverse reaction could still happen if data shows jobs lower than the 190,000 median forecast.

After the opening bell, there is the Chicago Purchasing Managers Index (PMI) at 9:45 a.m. Eastern, quickly followed by job openings at 10 a.m. Eastern. 

These are all lead-in reports for the most significant event of the week when Federal Reserve (Fed) Chairman Jerome Powell speaks at the Brookings Institution at 1:30 p.m. Eastern.

To top off the midweek economic reports, the Beige Book takes place at 2 p.m. Eastern. The Beige Book is a collection of commentary on the current economic conditions broken into segments and presented by the Federal Reserve, and it is released ahead of Federal Open Market Committee (FOMC) meetings. These reports can set the tone for the upcoming meeting in December.

Volatile market negative again

The Nasdaq and the S&P 500 were negative to close the session. The S&P 500 closed down 0.13%, losing 5 points, while the Nasdaq closed down 0.56%, a loss of 62 points. The Dow Jones followed, closing down 0.01%, declining 4 points.