U.S. stocks finished the first week of December in the negative zone as the Dow Jones index lost 0.94% and the S&P 500 broad market index dropped by 1.22%. For the U.S. stock market the month of December is considered to be a mostly positive month. But this time we may not have “presents” from Santa at the end of the trading season. The Santa rally is now questionable as the COVID-19 new Omicron variant is hitting the world badly, making tough decisions by the Federal Reserve (Fed) more possible.
Investors are waiting for inflation data to be revealed this Friday as it is forecasted at 6.7% year-on-year, which will be a new record high. The Chairman of the Fed Jerome Powell said last week that inflation is no longer transitory and that the Fed may accelerate its unwinding of bond purchases that have helped keep a lid on long-term interest rates during the coronavirus pandemic. His comments signal that monetary policymakers are focused more on taming inflation than on rising employment levels. “We remain cautious on S&P 500 amid a hawkish Fed tightening into an overvalued market,” Savita Subramanian, the head of US equity and quantitative strategy of the Bank of America, wrote in a note.
Some outrageous predictions suggest that inflation may run into the double digits in the coming years. The large Danish Saxo Bank predicts inflation may hit 15% in 2023. So, fresh inflation data this Friday may lead to a sharp correction with a temporary upside spike at the start. It is hard to say for the whole month of December, despite the negative start of the stock market. This week has started with slight upside indications for the U.S. stock indices expect for the Nasdaq 100.
So, it may proceed with the upside movements of the S&P 500 towards 4590-4600 points and for the Dow Jones – towards 35000-35030 points. However, indexes should first close the downside gap that was formed on November 26.
Investors are waiting for inflation data to be revealed this Friday as it is forecasted at 6.7% year-on-year, which will be a new record high. The Chairman of the Fed Jerome Powell said last week that inflation is no longer transitory and that the Fed may accelerate its unwinding of bond purchases that have helped keep a lid on long-term interest rates during the coronavirus pandemic. His comments signal that monetary policymakers are focused more on taming inflation than on rising employment levels. “We remain cautious on S&P 500 amid a hawkish Fed tightening into an overvalued market,” Savita Subramanian, the head of US equity and quantitative strategy of the Bank of America, wrote in a note.
Some outrageous predictions suggest that inflation may run into the double digits in the coming years. The large Danish Saxo Bank predicts inflation may hit 15% in 2023. So, fresh inflation data this Friday may lead to a sharp correction with a temporary upside spike at the start. It is hard to say for the whole month of December, despite the negative start of the stock market. This week has started with slight upside indications for the U.S. stock indices expect for the Nasdaq 100.
So, it may proceed with the upside movements of the S&P 500 towards 4590-4600 points and for the Dow Jones – towards 35000-35030 points. However, indexes should first close the downside gap that was formed on November 26.
