The S&P 500 declined 0.07% to 3,818, falling for the third session in a row, despite expectations that this week’s end-of-quarter balancing operations by pension funds would increase demand for stocks and increase their prices. The Nasdaq 100, on the other hand, was only able to gain a meager 0.18%, closing at 11,658.
A key indicator that lawmakers will move forward with their strategies to proactively tackle the hike of interest rates, Powell promised to use all of the capabilities at his discretion to reduce inflation to 2% and said the greatest error would be permitting unanchored expectations which did raise fears on the perspective moving forward.
The rapid adjustment cycle that the central bank is considering could undercut the rebound and increase the probability of a harsh landing, which could exacerbate the damage to the stock market even further. The Fed has still not reacted, despite the worsening balance of risks surrounding economic growth, indicating that the organization is for the time being stressing the return of price stability despite the consequences.
In the short term, volatility will increase due to stringent financial circumstances and a severely bearish attitude, prohibiting equities from mounting a significant and long-lasting recovery. As such, investors will continue to favor selling surges, keeping the S&P 500 and Nasdaq 100 tilted to the negative, likely for the foreseeable months of 2022.
It appears that the worst is yet to come for the investment prospects. Investors should get ready for the probability of poor results and dissatisfactory company forecasting amid declining margins and increased recession risks as the second-quarter reporting season approaches.
In the event that this possibility comes to pass, Wall Street may experience a further decline in the ensuing weeks and months before risky assets hit their lowest low prior to eyeing new highs.
The remaining two days of the week are marked by significant developments in the United States. The Fed’s preferred inflation measure, the May core PCE data, will be released on July 1. Meantime, the June ISM manufacturing survey will be made public on Friday. If final figures dramatically differ from consensus forecasts, volatility may increase, with price movements being exacerbated by reduced liquidity.
The Nasdaq 100 experienced a strong rally the week before, but sellers returned as the index approached a crucial resistance point between 12,175/12,225. This stopped the upward momentum and helped to create a significant bearish turnaround in the beginning of the current week.
Nasdaq 100 is currently just over a crucial technical support level at 11,500 considering recent changes. Investors should prepare for the prospect of revisiting this year’s lows if this barrier is broken in the days that follow.
On another note, preliminary resistance is expected at 12,175/12,225, accompanied by the 50-day SMA, assuming downside pressure subsides and buyers are able to ignite a recovery. Attention should shift to 12,600 in the anticipation of an upcoming strength.