S&P 500 Faces Headwinds as Inflation Fears and Rate Hike Bets Intensify

The S&P 500 ended last week on a flat note after falling due to rising yields and elevated oil prices. The US jobs report released on Friday was stronger than expected, with non-farm payrolls jumping to 162,000, far exceeding the 56,000 forecast.

This has raised concerns that inflation may be stickier than anticipated, increasing the likelihood of a rate hike by the Federal Reserve. The upcoming CPI report on Friday will be crucial in determining the near-term outlook for the S&P 500, with markets pricing in roughly a 59% probability of a September Fed rate hike.

If inflation comes in hotter than expected, it could lead to a sell-off in equities, while a softer reading would revive expectations of lower rates and potentially boost stocks. The near-term risks remain tilted to the downside due to the stronger jobs report, ongoing hostilities in the Middle East, and rising oil prices.