S&P500
Correction is proceeding: US market showed another dramatic decline.
US indices showed another sharp fall on Tuesday, after the first decline on Friday. At the close of Tuesday, the Dow dropped 1.9%, NASDAQ lost 1.5%, and the S&P500 went down 1.9%.
This time, the decline was attributed to Powell's speech. The Fed chief said that a new Covid-19 variant omicron could cause new disruptions in goods supply and components. Besides, this fact could cause a new boost in inflation. Powell also made it clear that the Fed may accelerate a rate hike. Yesterday, inflation data were released in the EU. Inflation rose considerably to 4.9%, the highest level since 1991.
Energy. Oil showed a strong decline on Tuesday, down nearly $6, following the fall in equity markets. However, on Wednesday oil is demonstrating a strong rebound upward with Brent trading near $71.50. Yesterday's low was $67.50.
On Wednesday, Asian markets showed resilience and did not follow the US market's decline. China indices were stable, Japan changed by 0.5%.
Global Covid-19 pandemic. The fourth COVID-19 wave is at highs. There were 588,000 new cases all over the world yesterday. Over 100,000 (106,000) cases in 24 hours were registered in the US again. The EU demonstrated an increase in new COVID-19 cases: there were 56,000 new cases in Germany, record high for the whole pandemic, 47,000 cases in France, 40,000 cases in Britain. In the US, the number of deaths increased to 1,400 yesterday. The figure is far less in the EU.
S&P500 4567, range 4530 - 4590. Thus, the correction in the US market continued with a dramatic decline yesterday. It is the second sharp fall in three trading sessions, indicating a significant change in major players' sentiment. The number of traders willing to exit the stock market has increased. Despite the fall, this market keeps very high price levels. However, the S&P500 has not reached a 50-day average in its decline yet. It is about 4,525, indicating that about 1% decline is necessary to reach its 50-day average. Notably, the second wave of fall was less than the first one. Besides, the indices updated the lows of Friday, but not too much. The market will probably form a new bottom near the low of Tuesday and start rising again.
The trigger for Tuesday's selling was Fed Chief Powell's speech. Powell said that high inflation may force the Fed to act more decisively, i.e. to accelerate the reduction of the economic support program and to consider a Fed rate hike as soon as in the first half of 2022.
The International Energy Agency (IEA) forecasts record rise in new renewable energy capacity in 2021, despite rising component prices and continued rise in 2022-25. High oil prices, if fixed, will spur new energy growth.
The new COVID-19 variant Omicron is still the central focus of markets. Vaccine makers tentatively believe that current vaccines can prevent severe forms of disease. However, additional research is necessary.
USDX 95.90, range 95.60 - 96.20. The dollar showed a marked decline yesterday after Powell's speech. Consequently, the decline was not dramatic.
USDCAD 1.2730, range 1.2680 - 1.2780. The pair has reached a medium-term high. It will probably take time to consolidate and determine further direction. The trend is upward so far.
Conclusion: The first US economic reports for November will be released today. The employment rate is expected to increase by 500,000 jobs. Manufacturing PMI is forecasted to reach 61-63%.
