Following a significant sell-off seen at the start of the regular session on Wednesday, US stock index futures continued to decline on Thursday. Investors' concerns that the rise in risky assets at the beginning of the year had no foundation and had gone too far led to an increase in US Treasuries.
S&P 500 index futures contracts decreased by 0.4% as the benchmark index hit its lowest point due to weaker-than-expected economic data. Futures for the Nasdaq 100 also fell 0.4%. A six-day upward trend in the European Stoxx 600 index has come to an end.
As mentioned above, expectations of continued aggressive policy on the part of the Federal Reserve System and the start of the recession in several developed world economies were indicated by the yield on 10-year Treasury bonds dropping to its lowest level since September and the securities themselves rising. Treasury bonds increased along the curve as the yields on two-year and 10-year bonds fell by 2 basis points and 1 basis point, respectively.
The new data indicates a marked slowdown in other economies, therefore it is obvious that the rally started earlier this year in response to optimism about China's economic recovery is beginning to wane. Reports from the United States showed a fall in company investment and consumer demand, which raised the possibility of a recession in the biggest economy on earth. However, this does not stop Federal Reserve officials from discussing the continuation of a tight monetary policy.
However, some people are still open to having their opinions changed: Deputy Governor Patrick Harker of the Philadelphia Federal Reserve and President Lorie Logan of the Dallas Federal Reserve yesterday articulated the case for a second, less significant rate increase of 0.25% at a meeting in February of this year. They made their remarks in response to information showing a decline in US retail sales in December.
James Bullard, a hawkish politician and head of the St. Louis Fed, predicted yesterday that by the end of this year, interest rates may reach 5.5%. Loretta Mester, president of the Cleveland Federal Reserve, added that the Fed must keep rising rates to accomplish its objectives.
As for the European benchmark index, shares in mining and energy companies contributed to its longest growth streak since November 2021. The surge has ended, though, and a correction has begun.
During trading in London, copper declined by 1.2%. Shares of Freeport McMoRan fell 2.8% in early New York trading. Shares of Philip Morris increased by 1.2% after Jefferies upgraded the stock to a "buy" rating.
Oil prices are sliding for the second day in a row as traders deal with worries about an American recession and yet another buildup of stocks. After losing roughly 1% on Wednesday, the price of West Texas Intermediate crude oil dropped below $79 per barrel.
Regarding the S&P 500's technical picture, the index's abrupt decline caused the power dynamics to shift. The index may drop further, but this will require a break below the $3,891 mark. The protection of this range, however, can halt the correction. Returning $3,923 under control will be the bulls' equally important responsibility. Only after that can we anticipate a more assured upward move on the assumption that the trading instrument will strengthen by $3,961. The threshold of $3,983 is a little higher; it will be challenging to surpass it. Buyers are only required to declare themselves in the vicinity of $3,866 in the event of a downward trend and a lack of support at $3,891. The trading instrument will be immediately driven to $3,839 upon its breakdown.