BTIG technical analysts have warned investors about the "very poor risk/reward" in the S&P 500 as the market awaits the March inflation data which is expected later today. The analysts stated that the daily stochastics for SPX are as overbought as they have been in the last year, and sector-wise, they highlighted banks, especially regional ones, as trading in a very bearish manner. Furthermore, they also weighed in on the discussion that speculators in S&P e-mini futures are the most net-short since 2011. In contrast, the S&P 500 futures have edged up 0.2% in premarket trading on Wednesday.
On the same day, Wells Fargo analysts warned the bank's clients that the S&P 500 is expected to correct about 10% in the next few months. This warning has added to the concerns regarding the potential fallout from the upcoming US inflation data. Meanwhile, investors will be watching for signs of inflation as prices for goods and services are expected to have risen at a quicker pace in March. This will be the biggest test of inflation for markets, after Federal Reserve officials signaled they are willing to let prices run hot for some time.
The looming US inflation data has also sent jitters through global financial markets, with investors bracing for the potential impact. The outcome of the report could have a significant impact on the financial landscape, including the equity and bond markets, as well as the broader economic recovery. The Fed has repeatedly stated that inflation will likely be transitory and that they will maintain their accommodative monetary policy for the foreseeable future. Nonetheless, a significant miss in the inflation report could still spook investors and lead to a sharp sell-off in the stock market.
