The US market fell under pressure ahead of Christmas. Dow dipped by 1.5% on Friday, while NASDAQ and S&P 500 lost 0.1% and 1%, respectively.
The benchmark S&P 500 traded within the range of 4.580 - 4.660, more specifically at 4.620. This was the second day the index declined after hitting year highs on Wednesday. The fall began the day after the Fed released its latest decision on monetary policy, when they finally recognized high inflation as the main problem. They sped up the tapering of stimulus, so now bond purchases will be reduced to $ 30 billion a month. This will make the program complete by April instead of June as previously planned. Wall Street analysts commented that the Fed seems to be preparing at least three rate hikes throughout 2022.
Other central banks went in the same direction, with the Bank of England raising its interest rate last week. The European Central Bank, on the other hand, only said it is preparing to curtail programs that support economic growth, despite inflation being a key problem in the area. The indicator is already at 5%, well above the target of the central bank.
Another reason why the US market dropped last week was the profit-taking of large players. But that is not a surprise since the market already hit record highs last Wednesday. Huge losses were seen in Apple and Tesla, followed by companies under the DJIA. There is nothing to worry though since the market has caught on to the 50-day average of the S&P 500, and growth from this level is possible.
On a different note, Biden's $ 2 trillion infrastructure spending plan is under attack again as some congressmen are reluctant to vote for a new spending package. This is most probably due to high inflation.
Meanwhile, asian markets dropped at the opening of the week, with Japan indices losing 2.2% and China indices falling by 1.3%
Oil also dipped this Monday, by around 2%. That is why Brent is trading below $ 71, at $70.90. The price fell 6% to $ 4 in the past three days. But gas prices in Europe remained at very high levels - $1,570
With regards to the coronavirus, the UK is in the spotlight as cases rose by 88,000 yesterday. This brought the overall rate to 474,000. Reportedly, the omicron variant is actively spreading in the country, displacing the delta strain. It is too early to talk about mortality from the new strain, but a sharp increase was seen from December 15-16. If daily mortality does not exceed 200, then the virus has lower death rate.
In the US, authorities said the medical system may not be able to withstand the surge in hospital admissions as a result of the omicron wave. Meanwhile, major vaccine manufacturers claim 3 shots are needed to protect against the variant.
Talking about dollar, a strong fall was observed at the close of last week, thereby pushing the USDX to 96.60. It ranged from 96.30 to 96.90, most likely due to the same reasons as why the US market fell last week.
Accordingly, USD/CAD traded at 1.2920, ranging from 1.2880 to 1.2960. Now, it looks ready to overcome 1.3000 in the medium term.
Conclusion: This week is the last week of active trading. Market players will leave on Friday for Christmas. But before that, they will react first on the November data on US income and expenses, as well as inflation in the consumer basket (RFE index).