US markets mostly stable as Powell less dovish

The XJO is expected to edge lower on open this morning after the U.S stalled overnight. Their futures have moved into the green.

Yesterday our market seemed to fall out of nowhere, as volatility returned with a gusto following strong retail sales numbers from the U.S the previous night. We smashed through support at 7,700 and 7,650 but managed to settle on key support at 7,600. This is the lowest our market has traded at since mid-February.

It is not within the nature of our market to fall for more than four days in a row, so it makes sense that we see some kind of relief rally today, or tomorrow – especially with key support at 7,600 holding us in place. However, from a medium-term perspective, this pullback was well overdue. The inflation story has settled in, and markets that have been irrationally pumping are awakening to the sobering reality that rate cuts may not happen this year.

US Markets

US shares were flat to lower overnight, with the NASDAQ and SP500 finishing lower, while the DOW JONES finished slightly higher. Markets were hit by comments from Fed Chair Jerome Powell who turned a little more hawkish overnight in response to the recently strong data. Powell stated that the FED can keep rates elevated for “as long as needed,” though he stopped short of pointing towards a potential for further rate rises. Overall it seems markets are coming to terms with the fact that rates are likely to remain elevated for some time, which has led to selling. Still, after a week of strong selling, don’t be surprised to see a breather soon.

Three of the eleven sector groups of the SP500 closed higher overnight, with Technology, Staples, and Healthcare seeing very small gains. Real Estate saw the most selling, followed by Utilities, while most other sectors were mildly lower.

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