Beige Book Points to Slowing Activity

With recession concerns returning to focus recently, the update makes for worrying reading. The Fed notes that while price levels rose moderately, consumer spending (accounting for around two-thirds of the economy) was down over the period. Real estate activity was also seen remaining subdued due to higher interest rates while hiring was seen slowing down also.

Downside Economic Risks

In all, the release supports the view that the US economy is slowing down and raises the risk of recession later in the year. For now, the release has not impacted the market’s expectations of a rate hike next month. Stocks have fallen back a little on the back of the data with traders digesting near-term Fed tightening risks and longer run growth fears. Next week’s US advance quarterly GDP will no doubt cause plenty of volatility with any weakness likely to lead to stocks pulling back more sharply.

Technical Views

S&P 500

The rally in the S&P has stalled for now into a test of the 4153.50 level. This is a key pivot for the market and while price holds below here, risks are skewed to a rotation lower back towards support at the 3910 level, in line with fading momentum studies readings. To the topside, 4305 is the next key upside level to note.