The decline of the U.S. stock market continued on Monday after a short pause last week. Investors are now focusing on the macroeconomic issues and monetary policy of the Federal Reserve (Fed).
This week a large set of economic data will be released, including the Consumer Price Index (CPI) that is expected to be close to October 2008 highs at 5.3% year-on-year, while September retail sales are expected to decline by -0.2% from the previous 0.7% in August.
Apparently, such high inflation is pressing on U.S. consumers and anti-inflation moves from the Fed are required. But, if inflation turns out to be higher than expected, that is above 5.3%, investors would suggest that the Fed accelerate the tapering of its massive monthly $120 billion bond-buying program and end it by April and not June. That would mean a decrease of more than $20 billion a month in the economy.
For the S&P 500 index that dived below the 4360 points support level it would mean a possible further decline towards 4270 points. If the index reaches this landmark by Wednesday, it may plunge even more to 4100-4100 points.
With such a sentiment in the market, it would be ludicrous to believe that Earning reports from the banking sector would reverse this downtrend as even banks are expected to comply with consensus by adding 27.6% in profit in the third quarter of 2021 compared to Q3, 2020. This would simply not be enough to outweigh macroeconomic negative data.
Brent crude prices failed to beat the highs of 2018 this Monday. The basic scenario for this week suggests that Brent prices are likely to remain close to the upper margin of $79-84 per barrel trading area. However, the proximity to these highs may provoke a short-term spike above $86.50 per barrel. In this case, opportunities will be created to open sell positions.
Gold prices hold on to $1750 per troy ounce. The mid-term target for prices remain at $1700 per ounce. The U.S. 10-year Treasuries reached 1.162%, a record since June 2021, pushing gold prices down.
The U.S. Dollar is getting stronger, pushing the EURUSD to the support at 1.14800-1.15000. It is hard to say whether any rebounds to 1.15700 from these levels would be useful for buying operations since they may be strong enough, but also may not happen at all. So, the size of the operations should be quite limited considering.
The GBPUSD failed to reached the 1.37000 level and slipped to the 1.35500-1.36000 area where it might be interesting to see some short-term buy operations.