US Stock Market Highlights:
- TheS&P 500, Dowand Nasdaq 100 fell for a third straight day amid tighter financial conditions and fears of a recession.
- Better-than-expected weekly US jobless claims continue to challenge Fed
- All eyes are on Fed Chairman Powell’s speech tomorrow, the day after FOMCDecisions of the Bank of England, SNB and Bank of Japan on monetary policy.
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After The Fed raised rates by 75 bp Yesterday, in an attempt to contain inflation, markets appeared to be recalibrating to the message. Federal Reserve Chairman Powell confirmed the central bank’s commitment to reducing inflation despite slowing economic growth. The FOMC’s economic projections now show the year-end interest rate at 4.4%, versus the 3.4% expected in June. The terminal rate in 2023 is now 4.6% with a significant upward revision.
Source: Federal Reserve
Based on these forecasts, US yields continued to be revised today, sending the two-year note above 4.10%, the best level since 2007. Fears of a Fed-induced recession were clearly visible on Wall Street today, with stocks falling across the board. This trend may not change anytime soon, especially since the job market remains very tight. The latest jobless claims numbers, which saw the number of jobless claims fall to 213,000, appear to back up that estimate.
As a result, U.S. stock indexes opened and ended lower on Thursday, marking a third straight day of declines and touching levels not seen since July. At the close, the Dow and S&500 lost 0.36% and 0.85%, respectively. Nine out of eleven sectors of S&P decreased, but the index decreased the most in the consumer sector, financial and industrial sectors.
On the other hand, growth-oriented stocks and semiconductors such as Advanced Micro Devices sent the Nasdaq100 down 1.17%. Tighter monetary policy has a negative impact on technology valuations, as rising borrowing costs reduce the value of their future cash flows when discounted at a higher rate.
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From a technical point of view, the technology index has already lost more than 31% of its value compared to the November peak. If the bears maintain control over the market and break through the 11485-11455 area, we may see a move to the 11365 -11325 zone.
Nasdaq 100 weekly chart
Looking ahead, Fed Chairman Powell is expected to deliver a speech tomorrow at 2:00 PM EDT, a day after the FOMC raises rates, followed by other central banks. For context, the Bank of England raised rates by 50 bp. and declared that the UK was likely to fall into recession. The SNB rose 75 bps, disappointing markets by sending EURCHF to record lows; and the Bank of Japan, maintaining its accommodative monetary policy, intervened in currency markets to support She.
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— Posted by Cecilia Sanchez-Corona, DailyFX Research Group