Relevance up to 13:00 2022-06-23 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
Futures on US stock indices fell on Wednesday after a fairly rapid growth was recorded yesterday. Traders tried to compensate for some losses after several weeks of sales, however, as has been repeatedly noted, all this was more like a "dead cat" than real purchases and interest from major players. Dow Jones Industrial Average futures fell 420 points or 1.4%, and S&P 500 futures fell 1.6%. Nasdaq 100 futures sank 1.8%. At the end of yesterday, the Dow rose by 641 points or 2.15%. The S&P 500 gained 2.45%, showing the best day since May 4. The Nasdaq Composite rose 2.51%.
Growing fears that the US economy will slide into recession have recently put quite serious pressure on stocks. Last week, the Federal Reserve raised interest rates by three-quarters of a percentage point, marking the biggest increase in Central Bank rates since 1994. Powell said that a tougher landing of the economy cannot be ruled out, since the Central Bank is forced to actively raise the cost of borrowing in response to the highest inflation in the last 40 years.
According to Christian Sewing, CEO of Deutsche Bank, the onset of a recession in Europe and the United States is only a matter of time. Developed economies are already facing a high probability of recession, as central banks are forced to aggressively tighten monetary policy to combat inflation.
However, there are also those who, in their baseline scenario, do not see a recession in the United States in the next few years. UBS believes that, despite the risks of a hard landing, the pace of economic growth will not decrease much. "However, even if the economy does slip into recession, it will be shallow and will not be sustainable, given the strength of consumer and bank balance sheets," the company added.
Goldman Sachs, meanwhile, believes that a recession for the US economy is becoming more likely, stating that the risks are shifted for the worse. "The main reasons are that our underlying growth trajectory is lower now, and we are increasingly concerned that the Fed will continue to react harshly to high consumer inflation expectations. If energy prices continue to rise, it will only complicate the situation," the message for customers says.
Obviously, during today's speech to Congress by Fed Chairman Jerome Powell, market volatility will be quite high. Investors will be carefully waiting for any signals indicating further behavior of the committee.
As for the technical picture of the S&P 500
Yesterday allowed investors to exhale a little, but it is unlikely that the level of $ 3,643 will be the minimum and the bottom that everyone is counting on. All that buyers of risky assets can count on today is a return to the control of the resistance of $ 3,731. A break in this range will push the trading instrument up to a new active movement, to the areas of $ 3,762 and $ 3,788, where large sellers will return to the market again. At least there will be those who want to fix profits on long positions. A more distant target will be the $ 3,826 level, but this is less realistic. In case of pessimism and another talk about high inflation and the need to fight it against the background of speeches by representatives of the Federal Reserve System with statements about more aggressive steps by the Fed, the trading instrument will easily update the nearest support of $ 3,677. A breakdown of this range will lead to a new sale at $ 3,643 and $ 3,608.