Investors are not able to properly digest the flow of crucial information. Yesterday, the US Fed presented its bitter forecast for 2023. Today, the Bank of England and the ECB have come up with their policy updates. Apart from policy meetings, the market should absorb fresh data on retail sales and the labor market. InstaForex analysts will guide through the maze of events and data.
Wall Street felt bitter disappointment on Wednesday because the Fed’s outlook came as an unpleasant surprise. The press conference of the Fed’s Chairman hurt market sentiment and pushed the benchmark indices down. The major stock indices closed the highly volatile session yesterday with considerable losses. The Dow Jones slipped 0.42%. The Nasdaq closed 0.76% down. The S&P 500 crossed the landmark level of 4,000 and dropped 0.61% to close at 3,995.
The doom and gloom settled on Wall Street in the New York pre-market. Futures on the key stock indices extended their slide. The fundamentals do not encourage a trend reversal intraday. Traders are braced for another volatile session. The S&P 500 is expected to trade in the intraday corridor between 3,910 and 4,020.
The stock indices fell on Wednesday after the Federal Reserve raised the key interest rate by 50 basis points and signaled its commitment to the fight against high inflation. The rate-setting committee passed this verdict unanimously. 7 from 19 policymakers voted for further rate hikes because the risks of high inflation outweigh other risks.
In the following press conference, Jerome Powell said that inflation remains way above the target level of 2%. The Fed needs convincing evidence of steadily waning inflationary pressure.
The federal funds rate was increased to 4.25-4.5%, the highest level since 2007. Policymakers are expected to raise interest rates to 5.125% in 2023. This figure became the bitter pill to swallow as Wall Street lost the hope for the dovish reversal in the Fed’s rhetoric.
The US economy has not entered a recession yet, though the chance for soft landing is fading. Investors are stoking fears that the Federal Reserve will push the economy into a protracted recession, thus causing high volatility in the stock market.
Jerome Powell is not alarmed by such prospects. He defined low GDP rates predicted for the next year as modest economic growth.
Besides, the Fed projects the unemployment rate to rise to 4.6% in 2023 from the current 3.7%. The regulator intends to keep interest rates at elevated levels at least for the nearest two years.
Almost all the 11 sectors included in the S&P 500 closed yesterday in the red. Healthcare was the only sector to log gains. The financial sectors showed the weakest performance, having lost 1.29%.
Stocks of the companies with mega capitalization are extending their losses for a second day in a row. Tesla is suffering the heaviest losses.
The Securities and Exchange Commission reported that the CEO of Tesla, SpaceX, and Twitter sold nearly 22 million of shares in the first three days of the week at the price from 155 to 177 dollars. As a result, his stake in Tesla contracted to 424 million shares or by 13.4%.
Moreover, Tesla shares dropped 3.2% yesterday and shed another 1.4% today. All in all, Tesla shares have plummeted 55% this year and the company’s market value has shrunk from 1.2 trillion dollars at its peak to less than 500 billion dollars today.
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00:00 INTRO
00:48 S&P500
01:41 USA
03:54 QUOTES
05:27 US INITIAL UNEMPLOYMENT CLAIMS
05:53 CORE RETAIL SALES, M/M (NOVEMBER)
06:09 MANUFACTURING PMI BY FEDERAL RESERVE BANK OF PHILADELPHIA (DECEMBER)
06:26 USDX
07:03 USD | CAD
07:32 OIL
08:19 BTC | USD
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