FX.co ★ 30.09.2022: Wall Street closing Q3 with high volatility (S&P500, USD, CAD, Bitcoin).

US equity markets are ready for another volatile session. US stocks tumbled following the rally on Wednesday. Mounting recession fears and turmoil in the UK stock market triggered massive selling on Thursday. After an early rise, the benchmark US stock indices took a nosedive. The Dow Jones plummeted by more than 600 points. The Nasdaq slumped almost 4% intraday. To sum up, the Dow Jones closed 1.54% down. The Nasdaq sank 2.84%. The S&P 500 skidded 2.11% to close at 3,640, the lowest level in one year.

The New York pre-market was volatile today. All key indices were gyrating in sync following the overall downward trajectory. The S&P 500 is expected to trade in the intraday corridor between 3,570 and 3,740.

Appalling inflation and robust selling in global stock markets dampen risk appetite among investors.

The culprit for the pessimism on Thursday was the new tax plan of the UK government. New British Premier Liz Truss advocated for tax cuts suggested by her cabinet. Such prospects pushed the pound sterling to the weakest level in 37 years.

Yields of US Treasuries again jumped yesterday as investors were mulling over the Fed’s hawkish rhetoric in the face of a looming recession. The US GDP data released on Thursday confirmed a technical recession. On the other hand, the weekly update by the Labor Department showed an unexpected decline in first-time unemployment claims, thus giving more leverage to the Federal Reserve.

The stock market failed to recover due to a fall in Apple shares. The Bank of America downgraded the rating of the iPhone manufacturer because of waning consumer confidence. Earlier, weak demand for iPnone 14 canceled the company’s plans for expanding production.

The Dow Jones is closing September with the worst results since the pandemic. The S&P 500 tumbled almost 8%, having tested the lowest level since November 2020. The Nasdaq lost more than 9% for the month, having tested the lowest level in two years.

Almost all key groups of assets incurred losses in the third quarter. The S&P 500 closed in the red for the third quarter straight for the first time since the bank crash in 2008/09. Moreover, the index has been following the longest losing streak since 1984.

The major stock indices were trading in the red in the early New York session, but everything changed following the release of the Fed’ favorite inflation indicator, PCE price index. The PCE deflator rose 0.3% on month in August after a 0.1% downtick in July. Prices of consumer goods fell 0.3% whereas prices of services climbed 0.6%. Food prices grew 0.8% but energy prices declined 5.5%.

The Core PCE excluding food and energy prices increased 0.6%. The annual rate eased to 6.2% from 6.4%. Today the market will get to know a consumer sentiment index by the University of Michigan. Several Fed’s policymakers are due to speak tonight.

Shares of high-tech giants such as Apple, Tesla, Microsoft, Amazon, and Meta traded mixed in the pre-market. Nike stock traded under pressure today. The shares dropped 10% in the pre-market after the company’s announcement. The world’s largest sports clothing manufacturer warned about a contraction in gross profit this year due to bargain prices and the firm US dollar. The currency market is also overwhelmed by extreme volatility. The US dollar index topped 112 points after sliding to a one-week low because the PCE deflator and the core PCE came in higher than expected. The US dollar index is now trading at 112.3 within an intraday corridor between 111.9 and 113.2. Despite sharp swings, the US dollar has been closing with gains for four months in a row. Its index has surged almost 10% this quarter on the back of expectations that the US Fed will go ahead with its fight against inflation despite recession risks. The US central bank has already increased interest rates by 75 basis points 3 times. The regulator intends to nudge the federal funds rate up to 4.6% next year. Interest rates will be put on hold until 2024. Such straight-forward statements dispelled hopes for the dovish turn in the near time. The greenback is advancing across the board.

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