FX.co ★ US Premarket on July 14: JPMorgan report puts pressure on the US stock market

During yesterday's publication of a soaring inflation report, futures for US stock indices continued to decline in trading on Thursday. Traders weighed the likelihood of a further tightening US monetary policy against the backdrop of the report. The Dow Jones Industrial Average futures lost 411 points or 1.34 percent. S&P 500 futures fell 1.26 percent, and Nasdaq 100 futures fell 0.89 percent. The S&P 500 has reached yesterday's low; a breach of this level will significantly increase the pressure on the trading instrument, resulting in a larger sell-off. However, we will discuss the technical picture below.

The data released yesterday revealed that the consumer price index in the United States increased by 9.1 percent in June compared to the same month last year, exceeding economists' expectations of an increase of 8.8 percent. The core consumer price index, which excludes volatile food and energy prices, increased by 5.9% versus the expected 5.7%. The Beige Book report from yesterday confirmed fears of an impending recession in light of rising inflation.

The yield on 2-year Treasury securities increased by nine basis points to 3.138 percent, while the yield on 10-year Treasury securities decreased by four basis points to 2.919 percent. The inversion of the two instruments is a well-known recession indicator.

As soon as yesterday's data was released, rumors began to circulate that the Federal Reserve may raise interest rates by 1 percent, or 100 basis points, at the end of this month. The Fed's policy depends on incoming data, and the central bank will continue to aggressively tighten monetary conditions until inflationary pressure reaches its peak and begins to decline. Jerome Powell has repeatedly warned that he is extremely serious about combating price pressure, so politicians will likely opt for another sharp rate hike.

Today, we anticipate reports on weekly applications for unemployment benefits and the producer price index for June in the United States.

Premarket

JPMorgan Chase's quarterly earnings fell short of analyst expectations, which added to the index's pressure. Earnings per share were $ 1.39, compared to the $ 1.53 predicted by analysts. The actual revenue was $ 13.13 billion versus the forecasted $ 13.48 billion. Profit decreased 29 percent from the previous year to $ 2.5 billion, or $ 1.39 per share. The 11 percent decline in revenue to $ 13.13 billion was caused by a 55 percent decline in investment banking services. In the premarket, shares of the financial corporation fell by more than 4 percent. A report from Morgan Stanley will be released shortly after that, which may further harm the market.

As for the S&P 500's technical picture

Increased pressure on the index does not preclude a new wave of decline. Only the return of the $ 3,773 level will allow the current sales cycle to be paused while maintaining hope for a recovery to $ 3,081. This will allow for an active movement of the trading instrument upwards to the $ 3,835 and $ 3,872 levels, where large sellers will return to the market. At least some traders will seek to lock in profits on long positions. A more distant objective will be $ 3,975. In the event of additional pessimism, weak economic reports, and high inflation, the trading instrument will continue to decline. This will result in a fresh rejection of risks and a revision of the closest support at $ 3,744. A decline in this sector will bring the index to $ 3,704. Below that is a more stable level at $ 3,677, where buyers will resume their aggressive behavior.