The SP 500 index declined by around 0.7% before the US opening bell Wednesday, last seen at about 4,055 USD. The index rose 2% to 4,088.85 at the close of Tuesday’s regular trading session. Nasdaq futures were down over 1%, while Dow futures were down roughly 0.6%.
Fed on course to hike by 50bps
Yesterday’s Powell speech failed to bring any meaningful news, as he basically reiterated the current hawkish stance of the central bank. Nevertheless, US equities trimmed some gains after his remarks.
While “there might be some pain associated with restoring price stability,” Fed Chair Powell told the Wall Street Journal on Tuesday that he believes the Fed will be able to “sustain a healthy labor market.” Powell also stated that there is “broad support” for two more 50-basis-point rate increases at the Fed’s subsequent policy-setting sessions, reaffirming his position from earlier this month’s meeting.
Retail sector is getting weaker
On Tuesday, Walmart reported dismal results, citing growing expenses, while Home Depot reported record sales and upped its 2022 projection. The earning’s season continues, focusing on the retail sector again.
Target’s first-quarter profit was halved, and the company warned of a greater margin cut due to increased gasoline and freight costs on Wednesday. Lowe’s also reported a larger-than-expected dip in same-store sales as demand for its equipment and building supplies moderated from pandemic highs.
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No clear outlook
The SP500 index is now stuck between the previous lows at 4,130 USD, currently the critical resistance, and the current cycle lows at 3,850 USD. As long as the price remains within this range, the immediate outlook seems neutral, and we might see some consolidation.
In case of a bullish breakout, we might see a relief rally toward 4,320 USD. On the other hand, a break below 3,850 USD could quickly send the index toward 3,700 USD.