FX.co ★ 22.06.2022: Wall Street again hit by panic sell-offs (S&P500, USD, CAD, Bitcoin)

22.06.2022: Wall Street again hit by panic sell-offs (S&P500, USD, CAD, Bitcoin)

Wall Street investors are again overwhelmed by fears because inflation has surged to record highs and oil prices have taken a nosedive. Let’s discuss developments in US markets. As we expected, a corrective rally on Wall Street was short-lived. On Tuesday, major stock indices had the strongest session this month. Today, the indices seem to negate yesterday’s gains.

Yesterday, benchmark indices closed with impressive gains. The Dow Jones was 2.2% up. The Nasdaq climbed 2.5%. The S&P 500 grew at the same degree to close at 3,764. Today, the three major indices are trading in the red. The S&P 500 has already lost its previous gains. It is expected to trade in the corridor between 3,680 and 3,75o today.

Before we present our gloomy forecasts, I want to tell you that yesterday all 11 sectors in the S&P 500 gained ground thanks to a 6% growth in energy stocks. Tesla stocks were the best performer as the shares surged 9% following statements from Elon Musk about lay-offs in his company and robust demand for electric cars. The absolute winner was Revlon. After the company declared bankruptcy last week, its stocks leapt by 456% from lows. The stocks added another 80% on Tuesday.

Today the doom and gloom is spreading across global stock markets. Benchmark indices are trading lower due to mounting fears and risks.

Morgan Stanley joined the ranks of experts who share the outlook for recession. Morgan Stanley warned that equities might slump another 20% in case of the economic downturn. Besides, experts at Citi reckon the probability of a recession next year at 40%. The bank’s analysts suppose that the ongoing cycle of the Fed’s monetary tightening could last from 12 to 18 months. Deutsche Bank also shares the pessimistic outlook.

In this context, investors are alert to remarks from Jerome Powell who will testify tonight and tomorrow. He will report on the semi-annual results of monetary policy. The US session is going to be volatile today. Negative remarks from the Fed’s leader could push Wall Street down. Analysts expect Jerome Powell to confirm the hawkish rhetoric.

The US dollar is trading flat today. Global economic worries and the risk-on mood must have reinforced the greenback, but its index has already settled at elevated levels. It opened the US trade at the same level it closed yesterday, at about 104.3. The US currency is going to tread water without a catalyst. If Jerome Powell does not spook markets today, the US dollar index is likely to trade in the corridor between 104.1 and 104.4.

The greenback is taking a pause awaiting news from the US Fed. Analysts expect the regulator to increase the interest rate by 75 basis points in July and by 50 basis points in September. The Fed’s Chairman will either confirm or refute such forecasts tonight. The economic calendar is empty for the US today. So, Powell’s testimony will be the focal point.

The USD/CAD pair is trading higher today, aiming to challenge 1.3000. The loonie cannot gain ground for a few reasons. The currency pair is likely to closely approach this target today. The trading corridor for today is defined between 1.295 and 1.3000.

Joe Biden is to blame for the loonie’s weakness. The US President is expected to announce a "gasoline tax holiday" that will put the 18% per gallon levy on hold for the next three months. Apart from this news, fears over low energy demand due to the COVID resurgence in China are pushing oil prices down. Brent crude dropped 6.12% to trade at 107.99 dollars a barrel. WTI declined 7.28% to trade at 102.66 dollars a barrel.

A red-hot inflation report showed that consumer inflation accelerated in Canada.


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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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