S&P 500 Forecast: Instacart IPO, Fed’s September meeting lead weekly calendar

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• S&P 500 closes lower for second week in a row.
• Federal Reserve will make interest rate decision on Wednesday.
• US Building Permits, Housing Starts, Existing Home Sales lead week on data front.
• S&P Global Manufacturing & Services PMIs are released on Friday.
• Instacart is expected to IPO on Tuesday at a valuation above $9 billion.

The Standard & Poor’s 500 index got off to a sleep start on Monday as traders wait for market-moving events later in the week. The index was barely postive an hour into the first session of the week, while the Dow Jones shed value on the margin, and the NASDAQ Composite advanced just under 0.2%.

The S&P 500 sank for the second week in a row last week as the utility sector led the index by gaining 2.7%, while the information technology sector’s 2.2% pullback caused the index as a whole to slide 0.16% despite a large advance midweek. The S&P 500 is now trading below the 50-day moving average and is yet to retest the summer’s July 27 range high. 

This week the Federal Reserve’s (Fed) meeting on Wednesday, September 20, occupies much of the headlines early on, although the market already thoroughly expects interest rates to remain stable. Tuesday’s Instacart initial public offering (IPO) should also boost sentiment as the market was rewarded the previous week for its trust in the Arm Holdings (ARM) IPO. 

A number of other significant economic indicators litter the calendar this week, including Housing Starts, Existing Home Sales and a survey of the US manufacturing and services sectors. NASDAQ 100 futures lead the pack on Monday morning, but all three major US indices are marginally in the black.

S&P 500 News: Fed expected to keep rates fixed at 5.25% to 5.5%

The CME Group’s FedWatch Tool gives the Fed a 99% chance of keeping rates fixed in their current range of between 5.25% and 5.5%. The US Consumer Price Index (CPI) did see headline inflation for August tick higher last week on the back of a surge in oil and gasoline prices, but annualized core inflation still managed to fall. The August Producer Price Index (PPI) also showed a worrisome rise in wholesale prices, but the market does not think data is strong enough to change the central bankers’ minds.

Most investors, portfolio managers and traders have concurred that July’s 25 basis point hike was the end of the hiking cycle this year and that the Fed will likely sustain rates at this nexus for another six months or so until inflation has been truly bested. 

The equity market won’t likely move on another rate pause, but stocks could trade up or down depending on how Fed Chair Jerome Powell characterizes the economy, especially labor. Any statement to the effect that the governors of the bank are contemplating further hikes will most certainly send stock prices lower.

Instacart IPO to raise as much as $660 million

Instacart boosted its share price range by $2 from $26 to $28 a share to $28 to $30 a share last Friday. This will raise approximately $660 million for the digital grocery delivery business and value the company between $9.3 billion and $9.9 billion.

With the company watching how Arm Holdings’s IPO last week was oversubscribed by 10x, it would be unsurprising if the price range moves even higher this week. 2023 has witnessed few significant IPOs year to date, so a successful Instacart IPO will provide more evidence that equity optimism is back.

According to the firm’s S1 filing, Instacart’s Q2 results demonstrated double-digit revenue growth that reached $716 million alongside a net income of $114 million. The IPO, which prices on Monday and begins trading on Tuesday, will see the issuance of 22 million shares with an additional 3.3 million shares available if book runners have the demand.

Heavy focus on housing in this week’s economic indicators

Though many traders are keeping one eye out on Detroit this week – where the Biden administration is attempting to bring the United Auto Workers union to the table with General Motors (GM), Ford (F) and Stellantis (STLA) as the partial strike is in its fourth day – a host of fascinating indices and surveys will be released this week on the US housing market, the manufacturing sector and the services sector.

First, August Building Permits on Tuesday are forecast to arrive at 1.445 million, slightly higher than the previous month. Simultaneously, August Housing Starts data will be released, with the market expecting 1.44 million, slightly below July’s figure.

Then on Wednesday, Existing Home Sales for August are expected to rise by 30,000 MoM to 4.1 million. 

Friday sees the preliminary S&P Global Manufacturing & Services PMI for September come to light. The market expects readings of 47.8 and 50.3, respectively, a tad below August’s readings.