The market reversed course at midday on Monday following comments from two non-voting members of the Federal Reserve. Raphael Bostic of Atlanta and Mary Daly of San Francisco didn't say anything new or surprising, but they emphasized the point that the Fed has not yet won the battle against inflation and rates would remain above 5% for a long time.
At 9 am ET here on Tuesday, Fed Chairman Jerome Powell will be speaking at an event hosted by the Swedish central bank. He likely will stick with the same views as other Fed members and make sure that the market understands that the Fed is not going to pivot to a more dovish stance any time soon. Fed members have been cohesive in their messages to the market, and that has slapped down recent attempts at more bullishness.
The next major market event will be the December Consumer Price Index report on Thursday morning. The market is anticipating a rate hike of just 25 basis points at the Fed's next meeting on Feb. 1, and if CPI comes to light that will cement the likelihood. This is already expected, so a much bigger reaction will occur if CPI comes in hot.
There is still another week before bank earnings reports start to hit. The general consensus is that earnings estimates are too high and that there will be estimate cuts when results are announced. I don't ever recall a time when there has been such a high level of agreement about estimates being too high, so we will need to wait to see how things develop as reports start to come in.
Technically the intraday reversal on Monday is a negative signaling that buyers don't have much juice. There was good momentum early in the day, but it fizzled out fast as soon as some Fed members opened their mouths.
The S&P 500 Index is now back in the trading range that started in mid-December and is likely to stay choppy as we await CPI and earnings news.