US Stock Market Key Points:
- TheS&P 500, Dow, and Nasdaq 100 surge following a risk-on comeback
- US dollar and US yields retreat from fresh highs after BoE announces plan to stabilize UK bond market
- All eyes on tomorrow’s unemployment claims and Friday’s PCE price index
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After the British Pound and UK bond market plummeted a few days ago as a result of the UK "Mini Budget" which included tax cuts, and a day after the BOE avoided an emergency rate hike to curb inflation, investors sensed uncertainty and risk aversion dominated the markets.
As a result, investors flocked to safe-haven assets. Stock indexes declined and the US dollar surged while the British Pound and UK bonds experienced a historic decline. The disorderly movement of GILT yields prompted the Bank of England to act in effort of calming the market, with the Central Bank launching an emergency QE program in which it will purchase long-term bonds.
The decision provided investors with a sense of relief and risk assets showed that in full, with rallies in equities and a softening in bond yields, both in the UK and US. US Treasury yields and the US dollar both retraced in sizable moves. The ten-year yield dropped to 3.70% from 3.97% yesterday, the biggest drop since 2009. The US dollar index (DXY) fell to 112.75 from 114.10. Meanwhile, gold, oil, and stock market indices rose from their lows as demand for risk assets recovered.
At the closing bell, the main US indices staged an impressive recovery. Following the Dow's formal entrance into a bear market in the previous session, the index increased by 1.88% today. The S&P 500 rose by 1.96% after reaching a 22-month low yesterday, while the Nasdaq 100 rebounded by 1.97% from a solid support area.
All the sectors of the S&P 500 posted gains today. The energy sector led the advance by 4.36% as Crude Oil prices soar 4.52% to $82.05 at the time of writing, following an unexpected decline in U.S. oil and gasoline inventories.
Regarding specific stocks, according to a Bloomberg article, Apple is abandoning plans to increase iPhone production after demand fell short of expectations. Apple shares dropped 1.26% during the day.
TECHNICAL OUTLOOK
From a technical standpoint, after hitting record lows for the year yesterday, the S&P 500 rebounded from a key support region around 3660. However, it is the end of the quarter, and there’s a number of resistance levels sitting overhead for bulls to contend with. Unless there is a policy reversal by the Federal Reserve, bulls have their work cut out for them as the US central bank has pledged to continue hiking rates until inflation is under control. Also note that corporate earnings season will begin in October. It will be interesting to see how rising interest rates have affected corporates. Levels to watch at the top are: 3766, 3802 and then 3847. A break and closing below 3660 puts the focus back on bears, with deeper support at 3639 and 3613.
S&P 500 Mini Futures Weekly Chart
S&P 500 Mini Futures Chart. Prepared UsingTradingView
Looking ahead, all eyes will be on tomorrow's unemployment claims and Friday's PCE price index.
| Change in | Longs | Shorts | OI |
| Daily | -11% | -5% | -7% |
| Weekly | -3% | 0% | -1% |
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---Written by Cecilia Sanchez-Corona, Research Team, DailyFX
