US stock index futures plummeted alongside European shares due to mixed corporate reports and growing investor consensus that Fed interest rates will continue to rise. Numerous Fed officials have been discussing the issue this week.
Futures contracts on the S&P 500 fell by 0.7%, and the Nasdaq 100 futures dropped by more than 1%. The Stoxx Europe 600 index sank by approximately 0.6% following Renault SA's report, which revealed declining sales as concerns over pricing pressures outweighed the French automaker's Q1 sales performance. The German DAX also displayed its worst performance in recent months.
Yesterday's Federal Reserve's monthly Beige Book review indicated that the US economy stalled in recent weeks due to tighter credit conditions. This suggests that the banking collapse in March has significantly altered lending conditions, and the results may not be positive. New York Federal Reserve Bank President John Williams and Chicago Federal Reserve Bank President Austan Goolsbee discussed this issue extensively yesterday. In general, policymakers are prepared to witness the consequences of the recent bankruptcy of two American banks, which are expected to slow down the US economy's growth more than anticipated.
Many traders continue to bet on a rate hike next month, which is unlikely to be the last one, as inflation is not going anywhere. Meanwhile, European Central Bank (ECB) Governing Council member Klaas Knot stated that the ECB may have to introduce a widely anticipated rate hike next month, subsequently raising rates in June and July. According to Knot, a "convincing reversal" in underlying inflation dynamics should precede a pause in the tightening cycle.
All of this allows the forex market to maintain balance but puts significant pressure on stock markets. Bitcoin fell below $29,000, oil also slumped, while gold rose after dropping below $2,000 per ounce on Wednesday.
As for the technical outlook for the S&P 500, risk assets remain in demand. Yet, the instrument will extend its rise only when bulls manage to push the price above $4,150 and $4,180. If so, the door will be open to the next level of $4,208. Another priority for buyers will be to maintain control of the $4,229 level. This will intensify the bullish bias. If the index moves down amid a rising possibility of more rate hikes and a looming recession, buyers will have to assert their strength near the range of $4,116. Otherwise, its breakout will push the price below $4,090 and $4,060 and will pave the way towards $4,038.