FX.co ★ 24.05.2022: Clouds again gathering above Wall Street (S&P500, USD, CAD, Bitcoin)

Hi, dear traders! Let’s discuss the prospects of a new trading day on Wall Street. The market opened on Monday without any surprise. The stock market printed notable gains yesterday. The major stock indices recovered and stepped aside from the abyss. However, the gains could be negated today.

The US stock market opened a new week on an optimistic note. The Dow Jones closed 2% up. The Nasdaq climbed 1.9% intraday. The S&P 500 rose 1.6% to close at 3,974. The pre-market today suggests a downward reversal. Wall Street indices are declining 0.7-1.7%. The information background is mixed. The highlight of the day is a speech by Jerome Powell. Amid higher volatility on Wall Street and investors’ fears, the S&P 500 is expected to trade in a wide corridor between 3,840 and 4,010 today.

Following a turbulent week, the stock market perked up on the back of the empty economic calendar on Monday. JPMorgan CEO calmed down investors by a red-hot forecast. He expects the net interest income to expand to 56 billion dollars in 2022. Inflation risks are escalating but could ebb away thanks to robust consumption. In light of this optimistic message, JPMorgan stock rallied 6.2%. Other high-tech giants such as Apple, Microsoft, Tesla, Amazon, and Meta closed mixed yesterday.

Today the news from Snapchat overshadowed market sentiment. Its stock slumped 29.1% in the pre-market, dragging down the Nasdaq which shed 1.62%. Besides, BlackRock, one of the world’s largest asset management companies, downgraded the US stock market’s rank to the neutral level. The reason is the Fed’s hawkish rhetoric and the lack of catalysts for a recovery. Wall Street will find it hard to rebound. Today market sentiment will depend on a speech by Jerome Powell tonight.

The US dollar also turned sour. Its index slipped another 0.2% on Monday and touched 101.80, the lowest level in one month. Later on, the index bounced off this level. It is now hovering at around 102. Analysts predict a further correction for the US dollar index that is likely to trade in the corridor between 101.60 and 102.10.

The index is going down in tandem with yields of US Treasuries. Investors are anticipating a slowdown in inflation in the US and have a faint hope for the Fed’s dovish policy decisions in July. The regulator might soften its rhetoric due to some snags in the labor market.

In a fresh report on new home sales, the actual reading fell short of market expectations. The Commerce Department reported that new home sales contracted 8.6% from a month ago to 763,000 units, undershooting the forecast for 765,000 units. Besides, the median cost increased significantly.

Apart from weakness in the housing market, the US dollar’s strength was dented by ECB President Christine Lagarde. The policymaker stated that the regulator has come to a turning point following 8 years of negative interest rates and massive monetary stimulus. She added that the ECB intends to wind down its asset purchases in early July to set the stage for the first rate hike shortly after.

The hawkish rhetoric of the ECB leader pushed yields of government bonds up. Moreover, the euro jumped to one-month highs against the US dollar. So, traders will be riveted to Powell’s speech tonight and the minutes of the Fed’s meeting in May.

The USD/CAD pair is trading quietly with minor fluctuations. The price has got stuck at around 1.2800. The currency pair is set to trade in the range between 1.2700 and 1.2820 before the comments by the Fed’s Chairman.

The Canadian dollar is lagging behind its American rival. The market has already priced in another rate hike by the Bank of Canada at the policy meeting next week. Inflation accelerated in April faster than expected to an annual rate of 6.8%, the highest score in the last 31 years. So, the regulator is determined to carry on with counter-measures.

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