SPX500 upbeat on trimmed Fed hike bets and strong earnings
SPX500 analysis
A dovish repricing of Fed rate hike bets and an overall strong earnings season that has sustained AI optimism helped SPX500 to fresh all-time highs last week. The latest inflation reports showed further easing in both consumer and factory gate prices, with CPI coming in at 3.4% y/y and PPI at 4.7%. Coupled with Friday's 0.6% month-on-month contraction in retail sales, the data strengthen the case for a September Fed hold, with CME's FedWatch Tool assigning a 70% probability to such an outcome. [1]
At the same time, the AI story remains a key tailwind, tech results were mostly strong and commitment to the physical AI buildout was reaffirmed. Meta Platforms, Amazon, Microsoft and Alphabet target combined capex of $720-$745 billion this year, while Nvidia's $500 billion coalition with major investment firms eased anxiety over mounting spending [2]. Moreover, the broader earnings season has been positive, with FactSet noting S&P 500 revenue growth of 15% so far in the second quarter, which would be the fastest pace since Q4 2021. [3]
The Fed's reluctance to hike, sustained AI momentum and a solid earnings scorecard create a favourable backdrop for SPX500, which is well positioned to extend its rally to new records toward the 8,000 mark. However, the index remains vulnerable to a move below the EMA200 that could test the bullish outlook.
Pressure on the Fed to tighten is not going away and markets still see higher rates this year. Despite recent soft prints, inflation remains well above target, with the Middle East conflict, tariffs and the AI boom all contributing upward pressure. Energy prices were up 14.7% y/y in July's CPI and retail gasoline prices remain above $4 per gallon [4]. The PPI report showed that electronic components and accessories rose 28% y/y and defence spending was up 5.6%.
Meanwhile, anxiety over mounting AI investments and the ability of spenders to generate meaningful returns will likely linger. The infrastructure buildout is increasingly funded by negative cash flows and debt issuance, all while elevated bond yields drive up the cost of capital. At the same time, the macro-geopolitical landscape remains volatile, posing risks for Wall Street, while fiscal concerns could erode confidence in US assets as the July deficit soared to $432.3 billion, the highest in over five years. [5]
Nikos Tzabouras
Senior Financial Editorial Writer
Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. With extensive experience in market analysis and a strong foundation in international relations, he brings a unique perspective to financial markets. Nikos emphasizes not only technical analysis but also on fundamentals and the growing influence of geopolitics on financial trends.
As a Senior Financial Editorial Writer, he delivers comprehensive and forward-looking insights across a wide range of asset classes, including equities, commodities, and currencies. His work explores how macroeconomic events, political developments, and global policies impact market dynamics, providing readers with a deeper understanding of both short-term movements and long-term trends.
References
| Retrieved 17 Aug 2026 https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html | |
| Retrieved 17 Aug 2026 https://insight.factset.com/sp-500-reporting-highest-revenue-growth-since-q4-2021 | |
| Retrieved 17 Aug 2026 https://gasprices.aaa.com/ | |
| Retrieved 17 Aug 2026 https://fiscaldata.treasury.gov/datasets/monthly-treasury-statement/summary-of-receipts-outlays-and-the-deficit-surplus-of-the-u-s-government |
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