The Week Ahead: Fed Rate Hike Decision Puts Stock Market Support Levels in Focus Now!

• Core CPI rose 0.3% monthly, the largest increase since April, matching the threshold Governor Waller identified as sufficient for another rate hike, while WTI crude briefly topped $100 and Brent approached $110
• S&P 500 earnings grew 50% year-over-year in Q2 with 27% growth projected for Q3, providing fundamental support despite tightening monetary policy and rising yields
• Critical support levels to watch: Dow must reclaim 53,143.20, Nasdaq needs to hold 25,650.43, and S&P 500 has a support zone at 7,565.31 to 7,527.28 to maintain the long-term uptrend

Market Summary: Fed Rate Decision and Inflation Concerns Weigh on Equities

Key Market Developments

U.S. equities declined last week amid heightened inflation fears and rising Fed rate hike expectations. The Dow Jones fell 1.57% to 52,573.29, the Nasdaq dropped 0.66% to 26,333.04, and the S&P 500 declined 0.80% to 7,656.98.

Inflation and Monetary Policy

Friday's CPI report showed headline inflation holding at 3.4% year-over-year, while core CPI eased to 2.4%. However, the 0.3% monthly core increase—the largest since April—has strengthened the case for Fed action. Fed funds futures now price in an 87.3% probability of a quarter-point rate hike on Wednesday, up from 59.4% the previous week. The current target range of 3.50%-3.75% would move to 3.75%-4.00%.

Market focus will shift to Chair Kevin Warsh's policy guidance and economic projections to determine whether this represents a one-time adjustment or the start of a broader tightening campaign.

Energy Markets

West Texas Intermediate crude briefly traded above $100 per barrel, while Brent approached $110 before retreating. Sustained oil prices above $100 could fuel further inflation concerns and deepen the September correction.

Earnings Strength

S&P 500 earnings grew 50% year-over-year in Q2, with analysts projecting 27% growth for Q3, providing support for equities despite rising yields.

Technical Outlook

The Dow has broken below first support at 53,143.20. The Nasdaq must defend 25,650.43, while the S&P 500 has support at 7,565.31-7,527.28. All indices remain above 52-week moving averages, maintaining long-term uptrends.

Key economic releases include Wednesday's retail sales data and the FOMC decision at 18:00 GMT.