The S&P 500 experienced a steep decline on Friday due to disappointing US Flash Services PMI and a rise in long-term inflation expectations, which hit a 30-year high. Concerns arose that if an economic slowdown occurs, the Federal Reserve may be slow to reduce rates while inflation remains above target.

Despite the negative data, one report alone may not trigger a major market correction. Upcoming Non-Farm Payrolls (NFP) and Consumer Price Index (CPI) reports will be important ahead of the March FOMC decision.

The daily chart indicates a pullback from all-time highs, with sellers targeting the 5960 support level. Dip buyers may also see opportunity around that level for a potential rally.

On the 4-hour chart, a bounce occurred near the minor support at 6020 as buyers entered the market, while sellers await a break lower. From a risk management view, buyers find better setups around 6020, while sellers eye a lower break for further declines.

The week ahead includes the US Consumer Confidence report, Thursday’s Jobless Claims figures, and Friday’s PCE data.

Markets took a hit on Friday, largely driven by weaker-than-expected economic data. The services sector, a key driver of US growth, showed signs of slowing. Adding pressure, long-term inflation forecasts reached levels not seen in three decades. This presents a difficult challenge: if the economy decelerates, policymakers may hesitate to lower rates while inflation remains above target.

Even with these concerns, a single piece of data is unlikely to trigger a sustained downturn. Investors will closely monitor upcoming reports on employment and inflation as these will shape expectations ahead of March’s central bank meeting. A rebound could occur if job figures show strength or inflation cools. However, should these reports confirm Friday’s worrying signs, pressure on equities may persist.

From a technical standpoint, price action suggests hesitation near record highs. Sellers remain in control for now, with attention on 5960 as a key area where demand may return. Short-term traders looking for value could step in around that level, but a push below it would open the door to further declines.

On lower timeframes, buyers attempted to regain ground near 6020. This level acted as a buffer, preventing deeper losses, though sellers remained patient. A break below would likely encourage further selling. Conversely, if support holds, short-covering could drive prices upwards. Risk management remains essential, with buyers focusing on defined levels while those looking for declines wait for confirmation.

The coming days bring fresh data that may sway sentiment. Consumer confidence results will give insight into household optimism, followed by jobless claims, which could signal labour market conditions. To cap off the week, Friday’s inflation figures offer the final piece before the next policy decision. Each of these releases carries the potential to shift expectations, meaning volatility may remain elevated.