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21.09.2023 02:03 PM
US premarket on September 21: US stock market plummets following Fed decision

US stock futures plummeted during yesterday's session and continued their downward trend today with significant losses. The S&P 500 futures dropped by 0.5%, while the tech-heavy NASDAQ shed over 0.7%. Treasury bonds continued to slide, but the dollar strengthened. Meanwhile, the European Stoxx 600 index fell more than 1%, with all sectors in the red.

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Yesterday, the Federal Reserve indicated that interest rates might remain higher for longer than previously anticipated. They also hinted at a possible quarter-point rate hike later this year. An upcoming Bank of England meeting holds significant importance, especially after recent inflation data. Today's statement by the Bank of England is expected to be a crucial event for European central bank leaders. MUFG Bank Ltd. reported that earlier this week, people had been expecting a hawkish stance from the UK regulator, but it remained uncertain at present.

Following the announcement, the pound continued its decline. Notably, UK inflation has unexpectedly slowed, causing traders to lower their expectations for further policy tightening by the central bank. Currently, the market sees only a 50% chance of a quarter-point rate hike today. Speculation is growing that if the Bank of England does raise rates, it might be the last hike. Both Goldman Sachs and Nomura even suggest that UK rates might have peaked. Nomura economists believe there is a real chance the Bank of England might either halt its rate-hike cycle this month or, more likely, increase rates while signaling it is the final move.

The yen, trading near 148 per dollar after its dip to a November low, started recovering, fueled by rumors of another verbal intervention by regulators. Nikko Asset Management Co. stated that Japan's Ministry of Finance might continue significant interventions around the level of 150. Currently, the yen's value has dropped to an all-time low when compared against a broad basket of other currencies, adjusting for inflation. This underscores the urgency for the Bank of Japan to address the yen's weakness. The central bank will hold a policy meeting this week, with outcomes to be revealed soon.

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In the commodity market, the oil rally is taking a breather as a smaller-than-expected drop in US crude inventories intensified the correction.

As for the S&P 500, demand for the index has fallen sharply. It is the right time to talk about further downside prospects for the market. Bulls need to take control of $4,382 if they want to do anything in the near future to cancel the bear market. From this level, they can push the price above $4,405. In addition, bulls should settle the price above $4,427, which will bring back the market balance. In case of a downward movement amid decreasing demand of risk appetite, bulls will have to protect $4,357. Breaking through this level, the trading instrument may return to $4,332 and $4,304.

Jakub Novak,
Especialista em análise na InstaForex
© 2007-2025
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