US open: Stocks fall after yesterday's Fed inspired gains

US futures

Dow futures -0.5 % at 33211

S&P futures -0.7% at 4187

Nasdaq futures -0.96% at 13112

In Europe

FTSE +1.2% at 7536

Dax +1.5% at 14034

Euro Stoxx +1.64% at 3750

Learn more about trading indices

Stocks edge lower

US stocks are set to open lower after a stellar session yesterday after the Federal Reserve hiked interest rates but cooled fears of the Fed turning more hawkish. The S&P 500 closed 3% higher in its most significant one-day jump since 2020.

The Fed, as expected, raised interest rates by 50 basis points and said it would start reducing its balance sheet, which had ballooned to just shy of $9 trillion across the pandemic. This was all expected and priced in.

However, comments from Fed Chair Powell, cooling expectations of a 75 basis point hike in the coming months was tonic for the markets. While Powell said that more 50 basis point hikes were likely, he also noted that a 75 bp hike was not on the table.

Today markets continue to digest the latest from the Fed and also weaker than expected jobless claims. Initial jobless claim rose to 200k last week, up from 180k. Whilst initial claims remain low, the markets are likely to keep a close eye on this figure going forwards for any signs that the tightening economic picture is impacting the labour market.

In corporate news:

eBay falls after the online retailer provided a gloomy forecast as growth slows after two strong years across the pandemic.

More news on the stocks to watch

Where next for the S&P500?

The S&P 500 has been trending lower since the start of the year, forming a eries of lower high and lower lows. The prices trades below the 50 & 100 sma and the RSI supports further downside. More recently the index rebounded off support at 4060 the April 29 low before running into resistance at 4310 the April 28 high.  Immediate support can be seen at 4220 with a break below here opening the door to a deeper selloff to 4140. Buyers will need to break above 4300 in order to expose the 50 sma at 4380.

FX markets USD pares losses, GBP tanks.

USD is rebounding after falling yesterday in a buy rumor sell-the-fact response to the Federal Reserve raising interest rates. The US Dollar index tumbled 0.85% yesterday and is trading 0.65% higher today, recouping the majority of the loss.

GBP/USD has tumbled following the BoE interest rate announcement. As expected, the BoE hiked interest rates by 25 basis points, the fourth straight hike, taking the lending rate to 1%, a 13-year high. However, while raising rates, the central bank warned of recession risks that have hit the pound’s value hard. The fact that three members voted for a more hawkish 50 bp hike, a move that would typically lift a currency, has created more anguish in the markets.

EUR/USD is falling lower against the stronger USD despite solid gains in European stocks. German factory order data was disappointing, highlighting the Russian war’s impact on the German economy. Factory orders fell -by 4.7% MoM.

GBP/USD -02.08% at 1.2407

EUR/USD -0.56% at 1.0520

Oil extends gains on EU embargo, OPEC+ in focus.

Oil prices jumped 5% higher yesterday and are rising again today on supply fears after the EU proposed a phased ban of Russian oil over the coming six months and as OPEC+ is unlikely to ride in to the rescue.

The EU proposed sanctions on Russian oil, but these still need to be agreed upon by all 27 members. Oil prices haven’t priced in the potential of a full-on EU ban on Russian crude oil, which would take the price back up to $120. EU member states could well come to an agreement by the end of the week, in which case oil prices could well continue climbing higher.

OPEC+ are meeting today and are not expected to deviate from the 432k bpd of increased output that they had previously agreed. OPEC+ have made no secret of the fact that they are not willing to get involved in this political dance, particularly given that Russia is a crucial member of OPEC+.

WTI crude trades +1.5% at $108.35

Brent trades +1.4% at $111.40

Learn more about trading oil here.

Looking ahead

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