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US stocks end mixed ahead of key Fed decision

 

Wednesday, June 15, 2022

The news shaping the markets today

Russia’s military forces announced plans to build a humanitarian corridor to help civilians evacuate the Azot plant in the city of Severodonetsk. The safe-haven US dollar index declined slightly after the news.


China’s industrial production grew by 0.7% year-over-year in May, following a 2.9% decline in April. The figure also surpassed the consensus estimate of a 0.7% decline, lending support to the CNY/USD forex pair.


Japan’s private-sector machinery orders surged 10.8% in April, versus projections of a 1.5% contraction. The news sent the JPY/USD pair higher in forex trading this morning.


Australia’s Westpac-Melbourne Institute Index of Consumer Sentiment fell 4.5% in June. Despite the index declining for the seventh straight month, the AUD/USD forex pair remained elevated.


New Zealand’s current account deficit widened to NZ$6.1 billion in the first quarter, from NZ$3.2 billion in the year-ago period. Despite this, the NZD/USD pair rose in forex trading this morning.

 

What’s happening: US stocks closed mostly lower on Tuesday, after recording sharp losses in the previous sessions.

What happened: The US Federal started its two-day policy meeting on Tuesday, with analysts expecting another rate hike today.

While investors remained on the sidelines ahead of the rate decision, one of the major US indices recorded gains.

Why it matters: Wall Street has been under pressure with investors expecting the Fed to raise interest rates by 75 basis points on Wednesday in a bid to combat surging inflation.

A rise in Treasury rates also exerted some pressure on US equities, with the 10-year rate spiking to a fresh 11-year high level.

US equities declined sharply on Monday, taking the S&P 500 to its weakest level since March 2021. The index settled in bear market zone for the first time since 2020.

US stocks made a slight recovery on Tuesday, with some support coming from the release of inflation data. The producer price index for final demand rose 0.8% in May, after gaining 0.4% in April. Excluding food, energy and trade services components, US producer prices increased by 0.5% in May, lower than market expectations of 0.6%.

The energy sector was among the top performing, driven by shares of Occidental Petroleum Corporation and Phillips 66. However, travel stocks fell again, with shares of Norwegian Cruise Line Holdings and Delta Air Lines heading south.

The Dow Jones index shed around 152 points, or 0.50%, to close at 30,364.83 on Tuesday, after surging as much as 170 points earlier during the session. The 30-stock index had declined 2.8% on Monday, putting it around 17% off from its record high level. The S&P 500 declined by 0.38% to close at 3,735.48.

However, the Nasdaq 100 bucked the trend and rose 0.21% to settle at 11,311.69 on Tuesday. Shares of Oracle Corporation climbed more than 10%, after the company reported better-than-expected quarterly earnings, driven by a “major increase in demand” for its infrastructure cloud business. FedEx’s shares jumped over 14% after the company announced actions to increase stockholder value, raising its quarterly dividend from 75 cents per share to $1.15 per share.

What to watch: Investors will keep an eye on the Fed’s interest rate decision today, with markets expecting rates to be hiked by 50 to 75 basis points.

The release of economic data on retail sales and import and export prices will also remain in focus today. US retail sales had grown by 0.9% in April and are expected to rise another 0.2% in May. Import prices are likely to increase 1.1% in May, while export prices are projected to rise 1.3%.

The markets today

The euro will be in focus today ahead of a couple of major economic reports from the Eurozone

Context: The EUR/USD forex pair recorded gains on Tuesday, after briefly falling below the $1.0400 support level on Monday.

Details: The EUR/USD forex pair had fallen to a 5-year low in mid-May and has lost around 8% this year, mainly due to the Federal Reserve’s aggressive monetary policy tightening, which has taken US interest rates sharply above the rates in Europe.

Expectations are now for the Fed to hike its key benchmark rate by as much as 75 basis points on Wednesday, which has continued to lend support to the US dollar. The US dollar index, which measures the greenback’s performance versus a basket of major rivals, jumped to its strongest level in over two years.

Investor sentiment was supported by economic data released by Germany. The ZEW Indicator of economic sentiment rose to -28 in June, from -34.3 in the previous month. Although wholesale prices in the country accelerated by 22.9% in May, it slowed from the record 23.8% a month ago.

The EUR/USD forex pair gained around 0.1% to settle at $1.0418 on Tuesday.

What to watch: Traders await the release of economic data on industrial production and balance of trade from the Eurozone today. Industrial production in the region had declined by 1.8% in March and is expected to grow 0.5% in April. The Eurozone’s trade gap is projected to widen to €23 billion in April, from €16.4 billion in the previous month.

Markets will also keep an eye on the Fed’s interest rate decision, due today.

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%, 0.91%, 1.20% and 1.26%, respectively.

Support & resistances for today

Technical Levels News Sentiment
EUR/GBP – 0.8675 and 0.8680 Negative
EUR/USD – 1.0441 and 1.0448 Positive
WTI Crude Oil – 118.92 and 119.25 Negative
DAX 40 – 13280.14 and 13350.69 Positive
FTSE 100 – 7179.95 and 7207.99 Negative

Market snapshot

Futures at 0400 (GMT)
EUR/USD (1.0443, 0.24%) Dow ($30,472, 0.39%) Brent ($121.15, -0.1%)
GBP/USD (1.2032, 0.28%) S&P500 ($3,761, 0.54%) WTI ($118.89, -0.1%)
USD/JPY (135.07, -0.30%) Nasdaq ($11,440, 0.82%) Gold ($1,817, 0.2%)

What else to watch today

Saudi Arabia’s inflation rate and wholesale price inflation, France’s inflation rate, India’s balance of trade, exports, imports and money supply M3, Turkey’s central government budget balance, South Africa’s retail trade and building plans passed, US MBA mortgage applications, New York Empire state manufacturing index, business inventories, NAHB housing market index, crude oil inventories, gasoline stocks, heating oil stocks, distillate stocks and Cushing crude oil stocks, Canada’s housing starts, as well as Brazil’s IBC-Br economic activity index and Central Bank of Brazil’s interest rate decision.


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