The U.S. stock market was taken by storm again after a powerful rebound on Monday with the S&P 500 index jumping up by 1.5% to 4674 points. But all the gains were wiped out on Tuesday as the index fell to 4586 points.
The reason for such disappointment came after a statement from the Moderna CEO Stephan Bancel was released saying he considers that the existing vaccines will be less effective against the new COVID-19 Omicron variant. "I think it's going to be a material drop. I just don't know how much because we need to wait for the data. But all the scientists I've talked to . . . are like 'this is not going to be good'," he said.
The market is extremely sensitive to any comments from the prominent scientists on the new Omicron variant. No wonder such a powerful negative reaction dragged markets back down. Stock indexes in Asia dropped with Japanese Nikkei 225 down by 1.31%, Hang Seng lost 2.41%, posting a new minimum from October 2020. European indexes are in red, losing more than 1%. Futures on U.S. stock indexes are also down by 0.7-1.5%.
The paramount question is how the Federal Reserve’s (Fed) chair Jerome Powell will respond to all these resent events, along with the Treasury Secretary Janet Yellen, as they are both going to speak today. According to a published Testimony text Mr. Powell is going to deliver to the U.S. Congress on Tuesday, he will express concerns about the COVID-19 new Omicron variant. Quoting from the Testimony “the recent rise in COVID-19 cases and the emergence of the Omicron variant pose downside risks to employment and economic activity and increased uncertainty for inflation.” That could be considered a dovish message for the next Fed meeting in December.
Will such a message be enough to pull the S&P 500 index above 4600 points? The technical picture suggests that it would be enough, and we may expect the index to rise to the resistance level of 4660 points by Friday. If the index does succeed to break through this resistance level, it may go up to 4740 points by the end of next week.
The oil market continues to suffer as Brent crude benchmark prices tumbled to $70.40 per barrel, a level not seen since August. Considering the technical picture, the current decline wave may end at $69.00-70.00 per barrel, but this is not set in stone. The volatility of the oil market is significant, and it may continue in this path considering the uncertainty regarding this new Omicron variant. What could be the response from the OPEC+? Would it consider a temporary break in production increase this time? We will have to wait a little longer for the answers.
The gold market is seen to be in a pause mode as prices are looking for a downslide, but still hovering around $1800 per troy ounce. Gold is seemingly waiting for a kickoff to drag prices towards $1550-1650 per ounce. Bullion prices could reach $1750 if the Dollar continues to rally.
The U.S. Dollar is struggling as more pressure is mounting on it. However, in order to break the current upward trend of the Greenback, the EURUSD needs to go above 1.13900-1.14000 today. If the pair fails to hold above this range, it may plunge to 1.1200-1.12500 by the end of this week.
The reversal of the GDPUSD looks less realistic as it is looking for a rebound from 1.33600-1.33800 with targets at 1.32500-1.33000.