US stocks overview:
- US stocks erase Wednesday’s gains and turn sharply lower
- The S&P 500 fell more than 3% and reached its lowest levels in 2022
- The selling activity on Wall Street appears to be caused by fears that the US economy is heading into a recession
Most Read: The Fed raised rates by 75 basis points in the largest increase since 1994 in an attempt to crush inflation
The bullish sentiment was short-lived on Wall Street. After a short recovery on Wednesday, US stocks took a sharp turn to the downside on Thursday, with most sectors selling violently amid growing fears of a recession. At the time of writing, the S&P 500 has given up all of the previous session’s gains and more, losing nearly 3% and setting a new low in 2022 around 3,660.
Yesterday, the Federal Reserve raised its benchmark interest rate by 75 basis points to 1.50-1.75%, marking its largest rise since 1994, but the strong action failed to provoke a negative reaction as President Powell made clear during his press conference that Movements of this magnitude would not be uncommon.
By not endorsing the Uber hawks’ approach, Powell temporarily calmed some nerves, but the mood soured again as traders began to acknowledge that the remnants of the central bank On the path to forcefully remove the residence Above the horizon of expectations. For context, 150 basis points of additional tightening are expected for the remainder of the year. This should take the federal funds rate above neutrality and into a restricted territory in late 2022, creating headwinds for risky assets.
restrictive monetary policy At a time when activity is slowing it will become an additional drag on economic growth, raising the possibility of a hard landing in the medium term. Recession fears escalated this morning after US 30-year mortgage rates rose to a nearly 14-year high of 5.78% and new home construction in May fell 14.4%, falling to their lowest since April 2020, a sign clear. Trouble for the housing sector.
Looking ahead, there toitttle Reason for optimism about the outlook for the S&P 500مؤشر So far. While bear market rallies are difficult to spot in time and cannot be ruled out, the general trading trend is still tilted to the downside of the world’s top stock index. However, the Down the next important leg It could develop soon if US companies start issuing negative earnings warnings ahead of the second-quarter earnings season. Traders should focus on any guidance provided in the coming days to gauge the strength of US companies amid weak GDP growth, inflation headwinds and tighter financial conditions.
S&P 500 Technical Analysis
Wednesday’s rally was just another bounce for dead cats. Today, the S&P 500 is down more than 3% and has broken below channel support at 3,735/3,700, although the trading session is far from over. If prices close below this area on Thursday, focus on the next downside turns to 3500, a key floor created by the 50% Fibonacci retracement of the 2020/2022 rally. If the rebound breaks out, initial resistance appears at 3810, followed by 4000.
S&P 500 تقني Technical Chart
S&P 500 daily chart created using TradingView