FX.co ★ US stock market on December 22, 2021

S&P500

The main US indices ended a three-day fall and showed good gains on Tuesday. The Dow added 1.6%, the NASDAQ rose by 2.4%, the S&P500 was up by 1.8%.

Both Japan's and China's indices climbed by 1.9% on Wednesday.

Oil was up $2 yesterday, following US indices. Brent is trading at $74 on Wednesday.

The gas crisis in Europe is not yet over. Yesterday, gas futures hit $2,000 per thousand cubic metres. It should be noted that this is in fact an unacceptable price for most consumers in the EU. The situation is not yet becoming critical, as most gas is supplied under long-term fixed-price contracts. The EU, however, plans to abandon long-term contracts. This is all happening against the backdrop of the beginning of cold weather in Europe.

The fourth wave is still going strong, +750 K cases worldwide yesterday. The number of cases in the US is high again, adding 180 K. The UK added 90 K cases yesterday. France reported 72 K cases. Authorities in the US and Britain report that the majority of new cases are now caused by the Omicron strain. Omicron is actively replacing Delta strain. Initial studies show that existing vaccines remain effective against severe disease and deaths, but the effectiveness of vaccines against mild disease has declined sharply. Authorities of countries struck by omicron are introducing a third vaccine as a way of protecting people. In Britain, the number of deaths rose by 175 yesterday. There is a possibility that Omicron is less lethal.

The S&P500 index is trading at 4,650 within the 4,620 – 4,680 trading range.

US oil inventories fell by 3.7m barrels over the week. This is more than expected.

US President Joe Biden has said 500 million Covid rapid tests will be made available at no cost amid new measures to tackle the surging Omicron variant. The US authorities are not yet planning to impose a nationwide lockdown for Christmas. This is positive news for business, but dangerous for the burden on medicine.

The sell-off in the US market is probably over for now. Investors have started to buy cautiously. However, new sharp drops are possible in the next week and a half, as investors take a wait-and-see attitude and the market is low on trading volumes.

US GDP for the 3rd quarter will be released today. Growth is expected to be at 2.1%. The market may be interested in the GDP deflator, a measure of inflation for all goods and services. It is expected to rise by 5.9%. The PCE price index will be released tomorrow, but its impact on the market will be limited before Christmas.

USDX is trading at 96.60 within the 96.30 - 96.90 trading range. The dollar index remains in a medium-term range, although it is consolidating below the upper end of the range. This could be a signal that a breakout of the index upwards is on the way.

USD/CAD is trading at 1.2916 within the 1.2890 - 1.2960 trading range.

CAD/USD is not yet reacting to the strengthening of oil. A new rise in the pair is possible. However, if oil shows a new wave of growth the pair could show a strong decline.

The market is waiting for Christmas. Trading volumes will be lower. Traders are looking forward to the US inflation report.