The key US stock market indices, the Dow Jones Industrial Average, the NASDAQ, and the S&P 500 closed in the red on Friday trading. However, the Dow Jones Industrial Average managed to rise slightly and to avoid a major drop by the end of the trading day and week.
We believe this outcome has been predictable. Both the NASDAQ and the Dow Jones Industrial Average failed to overcome their previous local highs within the latest upward movement. The S&P 500 has exceeded it slightly. The current situation remains extremely complicated. Moreover, a growing number of experts openly state that the stock market will face a crisis when the Fed will raise interest rates and unload its balance sheet. Besides, inflation hitting its 40-year highs is the main reason for a significant change in the US monetary policy.
At the same time, the latest US inflation report will be published tomorrow. Experts predict that the rate will surge to 8.3-8.5% yoy. Moreover, it may accelerate even more significantly... However, the higher the inflation, the more likely it is that the Fed will raise interest rates by 0.5% this year. Most largest commercial banks believe the Fed will raise interest rates by 1% in May and June. Therefore, soaring inflation is an additional factor that drives the US dollar and lowers stock indices.
Geopolitics. There has hardly been any latest updates on the Russia-Ukraine military conflict over the past two weeks. It was reported that fighting continued in the eastern and southeastern Ukraine.
As for the peace negotiations between Russia and Ukraine, the talks continue by video. However, both Russian and Ukrainian officials made no public statements about any progress since the recent round of negotiations in Turkey. According to Ukrainian presidential adviser Oleksiy Arestovych, the second phase of hostilities began five days ago. Besides, the fighting will take place in the eastern part of Ukraine. At the same time, most experts believe that the Russia-Ukraine war will end as early as April-May. Then further hostilities may resume in the Donbas region. Overall, Ukraine's issue remains complicated. Moreover, there is no hope that it can be resolved in the near future.