Stocks recovered from modest losses fueled by the surprisingly “hot” Producer Price Index (PPI) release last Thursday. But the hot PPI threatens multiple pillars of the S&P 500 Index (^SPX) rally, writes Tom Essaye, president of the Sevens Report.
The bulk of the latest rally in the broader stock market has been driven by renewed rate-cut expectations. That’s why traders “sold first and asked questions later,” as dampened hopes for a September rate cut were widely anticipated.
(Editor’s Note: Tom will speak at the Real Estate Plays for Profit and Income Expo, scheduled for Aug. 19-20, 2025. Click HERE to register FREE.)
The July PPI was also the latest in a string of economic data points to materially surprise markets versus expectations, as the headline surged by the most since March 2022 with a month-over-month rise more than 4X the consensus estimate. That is a problem for markets for several reasons in the current macroeconomic environment – because a resurgence in inflation pressures poses a threat to several “pillars” currently supporting the 2025 stock market rally.
From a technical standpoint, the trend in the S&P 500 has shifted back to cautiously bullish after the index notched fresh record highs on both an intraday and closing basis. Key resistance levels are 6,395…6,427…and 6,500. Key support levels are 6,340...6,238…and 6,104.
