FX.co ★ 22.09.2022: Post-Fed Wall Street too fragile to recover (S&P500, USD, CAD, Bitcoin).

22.09.2022: Post-Fed Wall Street too fragile to recover (S&P500, USD, CAD, Bitcoin).

Hi, dear traders! We are ready to share a red-hot review of US markets. Let’s discuss developments, trends, and forecasts! Wall Street benchmark indices plunged in light of the Fed’s policy decision. This response comes as no surprise, but Jerome Powell added fuel to the fire. As a result, the major stock indices close with sharp losses on Wednesday. The Dow Jones tumbled by more than 500 points or 1.70%. The Nasdaq lost 1.79%. The S&P 500 sank a whopping 1.71% to close at 3,789. Wall Street indices perked up in the New York pre-market, though it is too early for the optimistic forecast. The benchmark indices traded mixed. The S&P 500 is expected to trade in the corridor between 3,690 and 3,840. Market sentiment on Wall Street was in the grips of the Federal Reserve and its crucial decision. All 11 sectors included in the S&P 500 closed in the red. US retailers and utility companies showed the worst performance as their stocks slumped more than 2.3%. The trade volume on US trading floors was higher than usual with 11.03 billion shares versus the average figure of 10.79 billion shares over the last 20 trading days. The reason for market buzz is obvious. In a widely expected move, the Federal Reserve announced another rate hike by 75 basis points. The new federal funds rate has increased to 3.0 – 3.25%. The Fed predicts that the official rate will stand at the level slightly below 4.5%. Recent macroeconomic data suggest that the US Fed could raise interest rates by another 75 basis points at the meeting in November and slow down the pace to 50 basis points in December. Such prospects are extremely bearish for the stock market and risk appetite. At th e press conference, Powell signaled that two more rate hikes by 25 basis points could follow at the beginning of 2023. Thus, the federal funds rate could approach 5%. The Fed’s Chairman stated that the policymakers are committed to the battle against the highest inflation in the last 4 decades. The central bank is determined to push ahead until the battle is won. The regulator added that it is unlikely to decrease interest rates until 2024. Such a statement wrecked the hope that the Fed would take inflation under its control in the near future. Goldman Sachs, Barclays, and other investment banks upgraded their forecasts for interest rates in the US in light of such hawkish statements. In this context, futures on stock indices are trading quietly today. A fresh weekly update from the Labor Department is slightly higher than the previous one. The number of first-time unemployment claims rose by 5,000 to 213,000 last week, lower than the expected 218,000 applications. Nevertheless, even improvement in the labor market cannot assure the Fed to make a pause in aggressive tightening. Powell’s words dampen market sentiment on Wall Street. The stocks of top US companies are also affected by risk aversion. Shares of high-tech giants such as Apple, Tesla, Microsoft, Amazon, and Meta traded mixed in the pre-market. While the stock market is recovering from the post-Fed shock, the US dollar index is taking a breather in its stunning rally, retreading from a new multi-year high at 111.63. Aggressive Powell and mounting global uncertainty encourage growth of the US dollar index which has conquered the strongest level in the last two decades. At the moment of recording this video, the index is trading at 111.08. Its intraday corridor is defined between 110.7 and 111.4. The hawkish Fed pushed major currencies to multi-year lows. The euro plummeted to a 20-year low at 0.9810. Today most currencies are regaining their footing against the firm US dollar, though they are making minor gains. This week, influential central banks are holding their policy meetings, thus setting the currency market in motion. The Bank of England raised the key policy rate and stated that it would continue with more resolute measures against inflation if necessary. The regulator is ready to sacrifice economic growth. The Bank of Japan decided to maintain interest rates at around zero to support the fragile economic recovery. A lot of analysts think that such rhetoric is losing its efficiency on the back of the worldwide trend of higher borrowing costs.


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