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FX.co ★ The US GDP report harms the plans of buyers of risky assets

The US GDP report harms the plans of buyers of risky assets

US stock indices gained significantly at the opening after it became known that the US economy grew at a faster pace than expected in the third quarter. The Dow rose 474 points or 1.5%. The S&P 500 gained 0.4% and the Nasdaq lost 0.4%. However, the upward potential remains limited, and there are objective reasons for this.

The US GDP report harms the plans of buyers of risky assets

As the data showed, US GDP growth was 2.6% year-on-year at the end of the third quarter, compared with the forecasts of economists who put on an increase of 2.3%. The first quarter of positive growth in 2022 eased investors' fears about the onset of a recession next year, which slightly cooled the ardor of buyers of risky assets. Although, if we look at the long term, if the United States still manages to avoid slowing economic growth even against the backdrop of a record increase in interest rates, this will give impetus to a more powerful upward movement of stock indices.

Investors continue to be in turmoil and want more clarity about company earnings and how the Federal Reserve will proceed in the future. A strong GDP report allows the committee to continue its aggressive fight against inflation by raising interest rates and reducing the bond balance – in the short term, this is bad for the stock market and its further recovery potential. The market is a future-oriented mechanism, and profit and loss reports tell you what happened in the past. That's why investors are so eager for clarity and certainty at least from the Fed.

Problems remain in the NASDAQ technology sector. Shares of Facebook's parent company fell 24% due to a weaker forecast for the fourth quarter of this year and disappointing third-quarter earnings figures. The company also stated that, most likely, it will lose even more money next year because it got involved in the development of the metaverse. The report led to several analysts downgrading the stock.

It is worth noting that throughout this week, the indices remain in the black: The Dow and S&P are up more than 2%, and the Nasdaq is up about 1%. The Dow Jones index has been showing positive dynamics for the fourth week in a row since its five-week losing streak ended.

As for the technical picture of the S&P500, after yesterday's growth, the day did not start very well. The main task for buyers now is to protect the support of $3,808. As long as trading is conducted above this level, we can expect continued demand for risky assets. This will also create good prerequisites for further strengthening of the trading instrument and a breakout of $3,835. Only such a scenario will strengthen the hope for an upward correction with an exit to the resistance of $3,861. The furthest target will be the area of $3,905. In the case of a downward movement, buyers are simply obliged to declare themselves in the area of $3,808 and $3,773. A breakdown of these ranges will quickly push the trading instrument to both $3,735 and $3,699, as well as open up the possibility of updating the support of $3,661.

*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade
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