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US Stock Market Rebounds

The Stock Market Performance

The US stock market witnessed a strong rebound in the latest trading session. The main US indices have witnessed a 7-month decline with only one considerable attempt to build bullish momentum in March 2022. So, yesterday’s rebound turned some heads.

During the latest trading session, the strongest increase was seen on the DowJones which increased by 1.98%, followed by the SNP500 which increased by 1.86%, and NASDAQ which increased by 1.59%. It should also be noted that investors did not “sell off” during the last hour of the trading session. This indicates that day traders kept positions open or investors continued to buy throughout the trading day. Nasdaq-100-24.05.22.jpg

If we look at the price movements of futures this morning we can see a very different scenario. The DowJones has declined by 0.75%, the SNP500 by 1.18%, and NASDAQ by 1.79%. Over the past two days, NASDAQ has been the weaker performer. Is the market correcting as we approach events surrounding the Fed? DOW30-24.05.2022.jpg

It should also be noted that even though the bullish movement seen yesterday was considerable, the price movement was merely a retracement when compared to the longer-term trend.

What is influencing the Price Movement

The price movement over the past 24 hours has been influenced partially by comments made by the US President and the CEO of JPMorgan.

President Biden has indicated that his government will be looking at removing some of the tariffs put in place by former president, Donald Trump. This will allow easier and cheaper cooperation between the US and Asian markets. If actioned, it may result in cheaper raw materials and a potential wider consumer target market. Naturally, this was well received by investors.

The CEO of JPMorgan further excited investors by claiming that a recession is not a certainty. He advised that the “risk of a recession may disappear”. This triggered increased support in the stock market.

However, traders should be cautious of the reason that stocks have been on the decline recently. Over the past 7 months, the SNP500 has fallen by 18.5% as the Federal Reserve increased interest rates, decreased money supply and warned of a potential recession towards the end of the year.

The Fed

Currently, most economists are predicting that the US Central Bank will increase interest rates a further 2 or 3 times by 50 basis points. Officials are unlikely to add 75 basis points or more, since such a measure will increase the risks of a recession according to analysts. The Fed Chairman has already stated that he does not guarantee a "soft landing" for the economy. Further interest rate hikes can pressure the stock market but it will also depend on other factors such as the economic performance and investors’ risk sentiment.

The Fed Chairman is scheduled to speak tonight and tomorrow night - will traders wait for clarification before holding longer term positions?

IMPORTANT NOTICE: Any news, opinions, research, analyses, prices or other information contained in this article are provided as general market commentary and do not constitute investment advice. The market commentary has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and therefore, it is not subject to any prohibition on dealing ahead of dissemination. Past performance is not an indication of possible future performance. Any action you take upon the information in this article is strictly at your own risk, and we will not be liable for any losses and damages in connection with the use of this article.
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