Mixed Session Reflects Uncertainty, Largely Unaffected by S&P Upgrade

The S&P upgraded the US credit rating outlook before the start of the trading session from negative to stable. S&P also affirmed the US sovereign credit-ratings to AA+/A- 1+. The effect of credit rating changes on the markets is unclear, as in 2011 the Treasuries rose when the S&P lowered the rating of the US. The unclear direction of the S&P 500 today was due to the market digesting its advance of last week and will likely remain confined to a range from 1600-1660 until the Fed's meeting on June 18th-19th, said Bruce Bittles, an investment strategist at R.W. Baird. Bittles also cited a not so impressive May jobs report including lower manufacturing jobs and a downward revision to April's numbers. Brian Belski, Chief Investment Strategist at BMO capital markets described the jobs report as "not too hot not too cold". This plays into expectations of a ranged trading environment for the upcoming weeks as there is a lack of driving market news and a plethora of Fed speeches without any clear direction.

Last week's movement was fueled by May's unemployment report as well as support found at the 50 day SMA after two consecutive weeks of downwards movement. Negative data also came in the form of the ISM manufacturing index, which supported claims that the Fed will not reduce their $85b asset and bond purchasing program of QE anytime soon. Other sources of movement included the Non-Farm Payroll which came in at 175K versus the expected 163K. This mix of data initially propelled the market to triple-digit gains, but has left us at the beginning of this week in a range bound trading environment.

Reports of lower inflation than expected brought up the possibility of a prolonged QE program, as the mass printing of money hasn't affected the inflation inversely enough for the Fed to view it as a concern.