FX.co ★ US stock market on October 25, 2021

S&P500

The US stock indices are trading at year highs at the beginning of the week.

On Friday, US stock indices closed mixed: the Dow added 0.2%, the NASDAQ fell by 0.8%, and the SP500 eased by 0.1%.

On Monday morning, Japan's indices tumbled by 0.8%, and China's dropped by 0.15%.

Energy. Brent scored a new record of 86.40 today and is trading near its highs. Any solution for the gas crisis in the EU has not been achieved yet. Gazprom reported that it is pumping a record volume of natural gas into its own storage facilities. In the previous years, Gazprom supplied increased volumes of gas to Europe during the summer season. This year, the volume of gas in European storage facilities is at its record low ahead of the winter season.

There is information that Gazprom refuses to supply additional volumes of gas to the EU even at the current ultra-high prices. On the ICE exchange, gas is traded above $1,000 per 1,000 cubic meters. At the same time, there is an assumption that Gazprom deliberately refuses to supply additional gas to the EU in order to pressure Germany and the Union to launch Nord Stream 2 as soon as possible. Anyway, this is just an assumption and the gas crisis is deepening.

Rising inflation remains the most important global factor that may urge central banks around the world to tighten monetary policy. It will inevitably harm economic growth, consumer spending, and employment.

Covid-19 worldwide: The daily global infection rate has decreased to +450K cases. The worst situation is in Western Europe where the rate of vaccinations is the lowest.

The S&P500 index is traded at 4,544 in the 4,510-4,560 range. The main US index failed to consolidate above the September high but closed almost at its year high. In the previous week, the S&P500 added more than 90 points or + 2%. This means that investors are ready to continue to drive the market upward. The question is, how much strength and optimism do they have as prices remain extremely high, economic growth in the US is gradually slowing down, and the Fed begins to QE tapering. The next Fed meeting is scheduled for November 3rd.

This week, the US will report on its Q3 GDP on Thursday, October 28th. Experts expect the economy to slow down to 2.5%/+3.5% y/y versus 6.7% in the previous quarter. On Friday, the US will also present data on personal income/spending for September. Personal income is estimated to drop to 0.5% and personal spending to rise to 0.5%. Meanwhile, the PCE price index will also be presented. The reading has been steady at 3.5% since April, urging the Fed to tighten monetary policy.

The tech sector plunged on Friday amid a drop in Facebook and Intel shares. Intel lost 9% after it reported that margins would be lower for several years.

USDX is traded at 93.50 in the 93.20-93.80 range. The US dollar fell against the basket of currencies on Monday morning as the euro/dollar pair grew to 1.1660. This level is the euro's weekly high and the greenback's lows since the end of September. Next week, an important inflation report will come out in the US and the Fed will announce its decisions. Both the results of the report and the outcome of the meeting will determine the tern in USD. So far, the dollar's decline is seen as a pullback and not as a downward reversal.

Conclusion: The US market is likely to remain bullish, especially in case of positive GDP results. At the same time, its upside potential is limited.