US futures are trading modestly higher on the final trading day of the week. Traders are concerned about the Fed’s monetary policy, and they are concerned that perhaps they priced things wrongly when it comes to the Fed’s monetary policy. The anticipation among investors and traders seems to have been that the Fed is more than likely to slow down the pace of interest rate hikes as inflation has eased off from its 40-year high.
However, the economic data which was released this week has changed things for traders. In addition, the speeches made by various Fed members this week simply added more noise to this matter as there was no clear direction as to whether the Fed will be slowing down the pace of the interest rate hikes this week.
Nonetheless, we believe that it is highly likely that we will see the Fed reducing the interest rate, and the real reason investors are losing confidence or becoming a little cautious about the stock market rally is that every day we hear of companies cutting job cuts, and economic data is showing that the economic engine is losing steam. This elevates concerns among traders. Perhaps the recession is going to be much deeper.
US Stock Market
As a result of disappointing corporate results and economic data, both the Dow and the S&P 500 ended Thursday’s trading session with losses, marking their third consecutive day of losses. The Dow Jones Industrial Average lost more than 252 points, or 0.76%, and is currently 0.31% lower than it was at the beginning of the year. Both the S&P 500 and the Nasdaq Composite suffered losses of 0.76 percentage points, although all the US stock indices are sitting on healthy gains for the year.
However, it seems like all three indices will end the week red. The Dow Jones Industrial Average has dropped by 3.67 percent, putting it on course for its lowest week since September. The S&P 500 index is now trading at a loss of over 2.5% and is on track to have its worst weekly performance since the month of December. The Nasdaq is now trading more than 2% down and is currently on track to snap up a two-week winning run.
In terms of the forex market, we have seen decent strength coming back for the EUR/USD pair, which is on track to record another week of gains. Throughout this week, we heard from a number of ECB’s policy members that the ECB is done with raising the interest rate. They made it clear that there are a number of interest rate hikes in the pipeline and many of them could be near the 50 basis point mark. This has made traders more bullish about the prospects of the Euro, who believe that the currency is likely to score more gains due to the potential interest rate hike.
As for the GBP/USD, we can see that the pair is set to record another week of strong gains. Inflation is immensely stubborn in the UK, and it is still very much hovering near the 40-year high. The BOE is highly likely to hike the interest rate once again by another 50 basis points. In addition to this, the odds are still high that the next interest rate hike by the bank could be of the same magnitude.
Gold prices are on track to record another week of gains. The price is on track to record four connective weeks of gains as the risk-on rally has started to lose momentum, and traders have started to hedge their bets. Alongside this, technical analysis shows that the shinning metal’s price is trading above the 50, 100 and 200-day SMA on the daily time frame, hinting that bulls are fully in control of the price action. The 50-day SMA is also trading above the 100-day SMA, which is another sign of confidence that the current trend could pick up more steam.
Brent and Crude Oil prices continue to recover more losses, and bulls are less concerned about the nosebleed that they had a few weeks ago. Many traders believe that it is highly likely that we are going to see higher demand coming from China as it continues to dismantle its covid policies. The Crude inventory data also shows that there are little to no chances of inventory build-up which is another encouraging sign for the price action.
On the technical side, there is no doubt that both Crude and Brent Oil prices are moving away from the over the oversold region as buyers came into the market due to the heavy sell-off in prices. Crude Oil price is flirting with the 100-day SMA on the daily time frame, and if the price breaks above this level, we are likely to see more bulls coming to the market.
The crypto industry continues to attract attraction from the industry while investors are still nursing their losses. Crypto lender Genesis filed for bankruptcy and the company became the first firm to become the victim of the FTX’s debacle. This particular news is not completely new for the industry as many have been anticipating this for some time and the company has finally thrown in the towel.
In terms of the BTC price action, the crypto king has failed to score decent gains this week. We see the BTC price struggling to break above the 22K price mark and even that is not meaningful resistance. In order for crypto traders to have full confidence that a recovery is on the way, the BTC price needs to break above the 30K price mark.
The Asian stock market mainly traded higher on the week’s last trading day. The Nikkei index increased by 0.33%. The Shanghai index soared by 0.54%, while the KOSPI index soared by 0.39%. The Hang Seng index moved higher by 01.0%.
Dow Jones and S&P 500: Market Breadth
The Dow Jones’ market breadth lost some momentum yesterday. 57% of the Dow Jones stocks are trading above their 200-day moving average.
The S&P 500 stock breadth also confirmed some weakness in its momentum. 56% of the shares traded above their 200-day moving average.
Stock Market Rally
The S&P 500 stock index closed lower on Thursday; the index moved lower by 0.76%. The industrial sector led the index lower, and 9 out of 11 closed lower yesterday.
The Dow index declined on the second last trading day of the week; the Dow stocks moved the index lower by 0.76%. 11 shares advanced, while 19 shares closed lower.
The NASDAQ composite, the tech-heavy index, closed lower by 0.96% yesterday.