US stocks overview:
- The S&P 500 fell modestly after Tuesday’s rally on fears that the economy could be heading for a hard landing
- In testimony before Congress, Powell said inflation risks have risen and that the Fed is determined to restore price stability
- S&P 500 maintains a bearish view from a technical and fundamental point of view
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After trading higher for most of the day, US stocks fell in late tradingexiting negative territory, and failing to build a rally on Tuesday, indicating weak appetite among investors and traders to increase risk exposure amid Growing anxiety about recession. When all was said and done, the S&P 500 fell 0.13% to 3,759 in a volatile session marked by the Fed chair Semi-annual monetary policy report to Congress.
At the Senate hearing, Jay Powell presented some of them Positive comments on the current health status of the economy, but there was by no means a “pivot of doves”; Instead, keep a Very tough stance In the face of the four–CPI nodes readings are high. The Fed chief warned that the risks of entrenching inflation had increased, but sought to allay concerns by emphasizing that The central bank is determined to restore price stabilityIt is a sign that policymakers will do what is necessary to tame stubbornly rising inflationary pressures.
Despite Powell’s comments, US Treasuries fell sharply, with the two-year and 10-year bond yields falling by about 15 basis points to 3.05% and 3.15%, respectively. The The recent drop in oil pricesalong with mounting recession fears, has made traders expect that the Federal Open Market Committee may collapse sometime in 2023 and reverse course to avoid deep contraction. The shift in expectations can be seen in the Fed Funds futures curve, which now points to a final rate of 3.58% in May next year, down from 4.15% a week ago, and a 57 basis point reversal in less than 10 days.
Implied Forward Funds Reserve Price (May 2023 Contract)
Fed Funds futures prices set using TradingView
In terms of outlook, the macroeconomic landscape is likely to remain challenging for stocks heading to second quarter earnings seasonwhich creates the right conditions for volatility to flourish and come without warning. slowing economic growth will reduce demandwhile high input costs are high pressure margins, squeezes corporate earnings in the coming months. In this environment, the S&P 500 will struggle to achieve a real recovery like The rallies will continue to be sold.
Looking ahead, there is no relevant economic data in the US calendar on Thursday, but there is one high-impact event to watch. Fed Chais Powell scheduled to appear before Congress for The second day in a rowBut this time before the House Financial Services Committee.Merchants should check carefully Notes On the Economics and the stress cyclealthough he is unlikely to add anything new after his extended testimony before the Senate today.
S&P 500 Technical Analysis
The S&P 500 fell violently last week and hit a new low in 2022, but conclusively failed to break through the 3700-3665 cluster support. If this floor holds in the near term, buyers may dare to jump again, but to trust that the worst It is over, the index should rise above the resistance at 3810 and regain the psychological level of 4000. On the other hand, if the sellers regain control of the market and push prices below 3700/3665, all bets are off. Under this scenario, the bearish momentum could accelerate, paving the way for a decline towards the 3500 area, a key support created by the 50% Fibonacci retracement of the 2020/2022 rally.
Standard & Poor’s 500 daily Chart created with TradingView
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— By Diego Coleman, Market Strategist, DailyFX