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US stocks surge ahead of Fed’s decision

The news shaping the markets today

Ukraine reported that a fourth general of Russia’s forces had been killed in the ongoing Russia-Ukraine war, sending the WTI crude prices higher this morning.


China’s average new home prices rose by 2.0% year-over-year in February, following a 2.3% increase in the previous month. The news supported the CNY/USD forex pair.


South Korea’s unemployment rate declined to a record low of 2.7% in February, from 3.6% a month ago, sending the KRW/USD pair higher in forex trading this morning.


Japan recorded a trade deficit of ¥668.26 billion in February, versus a year-ago surplus of ¥175.93 billion. However, the JPY/USD forex pair rose after the news.


New Zealand’s current account deficit grew to NZ$7.26 billion in the fourth quarter, versus a year-earlier gap of NZ$2.83 billion, sending the NZD/USD pair lower in forex trading this morning.

 

What’s happening: US stocks recorded gains ahead of the Federal Reserve’s interest rate decision.

What happened: Investor sentiment was supported by data on US wholesale inflation coming in lighter than projected.

Amid a broad-based upturn, one of the major US indices notched its first gain in the last four trading sessions.

Why it matters: The FOMC started its two-day policy meeting on Tuesday, with policymakers set to announce their interest rate decision today. Markets are expecting the US central bank to increase interest rates for the first time in three years with the continuous rise in consumer prices.

The benchmark 10-year note yields eased ahead of the Fed’s decision, after having spiked to the highest level since June 2019.

Investors responded positively to data on US producer prices, which rose 0.8% in February, versus a 1.2% increase in the previous month. Analysts had projected producer prices to increase 0.9% last month.

The New York Empire State Manufacturing Index dipped unexpectedly by 15 points to -11.8 in March, recording its weakest level since May 2020. This came in significantly short of the consensus estimate of a positive reading of 7.

There was a sharp downturn in oil prices to their weakest level in around three weeks on Tuesday, with easing supply disruption fears due to Ukraine peace prospects and rising covid-19 infections in China. Energy stocks came under pressure due to the decline in oil prices.

Major indices traded higher on Tuesday with gains recorded by tech, consumer discretionary and healthcare stocks. Shares of Microsoft and Netflix added around 4% on Tuesday. Airline stocks also moved higher after five major carriers boosted their revenue guidance.

The gains came despite China closing non-essential businesses in Shenzhen to contain the spread of infection, which could impact supply chains globally.

The Dow Jones gained 599.10 points, or 1.8%, to close at 33,544.34, while the S&P 500 climbed 2.1% to 4,262.45 on Tuesday, recording its first gain in four days. The Nasdaq 100 jumped 3.16% to settle at 13,458.56.

What to watch: Traders look forward to the Federal Reserve’s announcements, expecting a rate hike of at least 25 basis points. Investors will also monitor the central bank’s plans to end its bond-buying program.

The release of data on US retail sales, export prices and import prices will remain in focus today. Markets will also keep an eye on the Russia-Ukraine situation, with Ukraine’s capital city of Kyiv declaring a 35-hour curfew following missile strikes by Russia.

The markets today

Gold will be in focus today after recording losses on Tuesday

 

Context: Gold futures fell sharply to their lowest settlement in around two weeks on Tuesday.

Details: Traders monitored the recent inflation data from the US and awaited the key interest rate decision from the Federal Reserve.

The US central bank is widely expected to announce its first rate-hike since 2018 in a bid to cool surging consumer prices, despite Russia’s ongoing conflict with Ukraine, which is expected to impact global economic growth.

Russia and Ukraine continued their talks, after the latest round of negotiations ended on Monday without any agreement.

While investors have been adding safe-haven gold in their portfolios since the start of the Russia- Ukraine war, prices of the yellow metal started to ease ahead of the major Fed decision.

April gold lost $31.10, or 1.6%, to close at $1,929.70 an ounce on Tuesday, hitting its lowest settlement since March 2.

May silver declined by 14 cents, or around 0.6%, to settle at $25.158 an ounce. May copper fell 0.2% to $4.513 a pound, while April platinum fell 4.7% to $1,002.50 an ounce and June palladium closed at $2,412 an ounce, down 0.2% on Tuesday.

What to watch: The ongoing war between Russia and Ukraine will remain one of the major concerns for traders. Markets will also focus on rising covid-19 cases in China, with total cases surging past 462 million globally.

Other Markets: European trading indices closed lower on Tuesday, with the FTSE 100, DAX 40, CAC 40 and STOXX Europe 600 down by 0.25%, 0.09%, 0.23% and 0.28%, respectively.

Support & resistances for today

Technical Levels News Sentiment
Nasdaq 100 – 13432.61 and 13483.87 Positive
S&P 500 – 4250.05 and 4267.10 Positive
Nikkei 225 – 25664.84 and 25764.84 Positive
Gold – 1920.45 and 1924.40 Positive
Silver – 25.064 and 25.167 Positive

 

Market snapshot

What else to watch today

Saudi Arabia’s GDP growth rate, South Africa’s FNB/BER consumer confidence index, SACCI business confidence index and retail trade, Italy’s inflation rate, US MBA mortgage applications, NAHB housing market index, business inventories, crude oil inventories, gasoline inventories, heating oil stocks and distillate stockpiles, Canada’s inflation rate and manufacturing sales, as well as Australia’s new home sales.

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