Hot Core CPI Takes SPX Under the 7,790 Flip, and the Banks Lead Lower

Core inflation ran hot in September. Prices ex food and energy rose 0.3% on the month against 0.2% expected, and headline went to 3.7% from 3.4%. S&P futures were up about 20 points into the 8:30 print and gave it all back in the first minute, and the 10-year jumped to about 5.27% from 5.19%. The banks are making it worse. Bank of America took a $1.2 billion settlement with regulators over anti-money-laundering failures, missed on revenue and is down more than 8%, and Morgan Stanley is off 4% despite beating on equities trading. SPX closed Tuesday at 7,805.45, down 2 points. Premarket 7,780.

That was the leg holding the index up. For a week the chips sold off four different ways and SPX barely moved, because the banks and the Dow kept taking the weight, and Monday was the cleanest version of it with the Dow up 0.4% and the Nasdaq down 0.4%. Tuesday the Dow slipped 0.35% while SPX closed flat, and this morning the banks are the ones leading lower while Micron drops another 5%. October hike odds sat around one in five last week after the soft jobs report. Core at 0.3% argues the other way two weeks before the Oct. 27-28 meeting, and PPI tomorrow at 8:30 is the next read.

Premarket 7,780 sits halfway between the flip at 7,790 and the put wall at 7,770, in negative gamma, barely. The wall is thin and 7,760 is the same size, so 7,760 to 7,770 is one block with the 13-day and prior demand at 7,763 on it, and under that it's an even slope of small negatives down to 7,700, nothing that would stop a break. Resistance is close. Tuesday's low is 7,786, the flip has prior demand on both sides of it, and positive gamma doesn't begin until 7,795, where it runs dense all the way to the 7,870 call wall.

The lean is short under the flip, sold on a bounce into 7,786-7,790 for 7,779 and then the 7,763 block. Selling the open 10 points over a put wall is the poor entry, since the first reaction off a wall tends to be sharp. A break of 7,760 runs to 7,746 and the 21-day at 7,738. A hold back over 7,793 ends it.