Stock Market Today
US and European futures are set to rise again as investors are ready to pick up the momentum when they left off yesterday. Traders are also digesting the message from the FOMC Minutes, which confirmed the Fed’s further support to control inflation.
The S&P 500 recorded its third consecutive day of gains yesterday, which is encouraging. However, traders should continue to approach the markets cautiously as there are too many moving parts and unknown factors.
Recession concerns continue to loom on Wall Street, and another volatile earnings season ahead will not only give us a lot of inflation about consumer health but the outlook for the US economy as well.
The FOMC Minutes made it clear to investors and traders that the Fed is fully committed to bringing inflation lower under any conditions. Many traders’ question about “unconditional commitment” was also answered in the FOMC Minutes. The Fed is committed to fighting soaring inflation, and investors should not think that the Fed will be done by increasing the interest rate two more times. The cost of living crisis is running at its highest level since 1981 in the US, and the Fed is eager to bring the inflation reading lower and the interest rate hike process will continue until the inflation reading is close to their 2% long-run goal. This means that the pace of the interest rate isn’t likely to slow down as well, although the Fed will keep a close on the economic data.
One crucial factor to note here is that the FOMC Minutes, which were released last night, confirmed that the Fed could be increasing the interest by 50 to 75 basis points in their next meeting, but they don’t factor in the latest employment reading. The latest US NFP number is due tomorrow, and even though the Fed has said that they want to increase the interest rate by 50 to 75 basis points, a weak number could easily shift the expectations among investors and traders.
The Fed also acknowledged that its aggressive hawkish monetary policy has a cost. Still, they are willing to pay this cost in the short term to achieve their goal, as not controlling inflation now will have a much higher price for the US economy in the future.
Oil prices came under further pressure yesterday and dropped below the critical price level of $100. The primary reason for the current selling pressure on oil prices is that traders are concerned about the possible threat of recession taking place and negatively influencing the prices. Additionally, many traders believe the worse could be behind us in terms of oil supply shock with sanctions the US and its allies were going to impose on Russia already done. In addition, if we look at the rig count numbers in the US, they are as high as they can be, and Saud Arabia continues to assure markets that they have enough spare capacity to meet the demand.
Today, we see some bids coming back for the Brent and crude oil prices as the past two days’ sell-off have been immensely strong. Brent oil prices are flirting with the 200-day SMA on the daily time frame, which can support prices.
The precious metal is on track to record a brutal week in terms of its prices. The sell-off for gold prices over the last two days has been intense due to the dollar’s strength. Traders continue to bet that the Fed’s commitment to controlling inflation is purely unconditional, and they aren’t going to stop until they bring inflation closer to their target of2%.
Several Fed members are speaking later today, and their speeches are likely to create noise, which could bring higher volatility for the yellow metal. In addition, traders will also be keeping an eye on the ECB’s Monetary Policy Meeting Accounts. The biggest fear for the Eurozone is a recession, and such an environment could bring bids for the precious metal.