Today, the US Central Bank begins its two-day meeting and is expected to raise rates again by 75 basis points tomorrow. The committee now welcomes the strategy of holding interest rates for a long time. Politicians are trying to avoid a situation that led to a catastrophe in the 1970s when inflation got out of control. Expectations of a one-point increase were also partially revised: only two out of 96 economists surveyed by Bloomberg now expect such a development.
The Federal Reserve is tightening policy in the face of a recession as the yield of 2-year US bonds continues to rise and the inversion of the yield curve increases. The yield on 10-year Treasury bonds has already exceeded 3.5%. In comparison, the yield on more policy-sensitive two-year bonds has reached its highest level since 2007 and is ready to overcome the 4% mark, reflecting fears of a hard landing on the economy.
The Citigroup Inc. index has shown a decline in the rating, tracking the profitability of companies over the past 15 weeks. Yesterday, strategists at Morgan Stanley and Goldman Sachs Group Inc. warned that the risks to earnings and stock valuations would increase significantly in the near future. The season of reports for the 3rd quarter will cause a lot of noise.
In the EU, the European benchmark Stoxx 600 index declined due to losses in the real estate market and the mining industry. Bitcoin is struggling to get back to the 20,000 level, but it turned out pretty bad. Oil has fallen below $86 per barrel, which will help partially smooth out inflationary pressure.
As for the technical picture of the S&P500, after yesterday's sharp upward surge, the markets are returning to their more or less truthful levels. The bulls need to protect the level of $3,872 from building an upward correction in an attempt to find the bottom. Only after that will it be possible to count on a second breakthrough to $3,905. The breakdown of this range will support a new upward momentum, already aimed at the resistance of $3,942 and $3,968. The furthest target will be in the area of $4,038. In the case of a downward movement, a breakdown of $3,872 will quickly push the trading instrument to $3,835 and open up an opportunity to update the support of $3,801. Below this range, you can bet on a larger sell-off of the index to the lows of $3,772 and $3,744, where the pressure may ease a little.