US Stock Market Key Points:
- TheS&P 500, Dow, and Nasdaq 100 opened in the red but pulled back after the open, holding the same support that came into play last Friday.
- Weaker housing and tighter financial conditions fuel fears about economic growth.
- All eyes are on the FOMC monetary policy decision on Wednesday. Later in the week, the Bank of England, Bank of Japan and Swiss National Bank will follow
After falling more than 5% last week in the wake of hotter-than-expected CPI data and a FedEX warning of a significant worsening in the global economy, major U.S. equity indices consolidated today amid light data on the Economic Calendar and a rebound of US Treasury Yields. Global markets are anxiously anticipating the FOMC monetary policy decision on Wednesday.
At the close, the Dow and the S&500 finished in positive territory climbing 0.64% and 0.69% respectively. Nine of the eleven sectors of the S&P advanced. While the Industrials and Materials Sectors rebounded after a sharp drop on Friday, the Consumer Discretionary sector also led gains as the travel industry continues to show signs of resiliency. Airline companies such as American Airlines Group and Southwest Airlines Co closed around 3.5% higher.
Conversely, one of the sectors dragging the S&P 500 index was Real Estate on the prospect of higher rates. Recently, US treasury yields have moved substantially higher as the FOMC has ramped up the verbiage around containing inflation. The two-year Treasury note has hovered around 4%, a level not seen since 2007, and the 10-year yield has poked through 3.5%, the highest since 2011. Such moves have impacted mortgage rates which now stand around 6%. Today, the NAHB Housing Market Index showed a decline in sentiment for the ninth consecutive report, affirming that surging home prices and mortgage rates at levels not seen since 2008 are dampening the housing outlook.
From a technical point of view, the S&P 500 index traded below a key area of support last week at 3900. This week opened with continued bearish movement in futures but that move was pared around the US open, with prices pushing back for a resistance test at prior support in the zone that spans from 3902-3915.
S&P 500 (ES1) Daily Chart
Notably, while S&P 500 futures did set a fresh low ahead of the bell, the Nasdaq did not, with today’s low holding inside of Friday’s low and closing 0.77% higher
Nasdaq 100 Daily Chart
Looking ahead, all eyes are on Wednesday’s FOMC monetary policy decision. Following last week’s higher than expected CPI number, investors priced-in a 20% chance of a 100-basis points rate increase, but as fears of a global recession continue to grow, those odds have dropped to 18% and investors are anticipating a 75bp rate hike. Similarly, the Bank of England, Bank of Japan and the Swiss National Bank will be in the spotlight later in the week.
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—Written by Cecilia Sanchez-Corona, Research Team, DailyFX