Technical Analysis

Major stock indices take it on the chin today. Weaker than expected data/hawkish Fed hurt.

You asked for it. You got it.

The Fed does not like rising assets like stocks as they continue to worry about inflation. More stock wealth will just encourage spending and speculation. The reality is the Fed created the speculation way back when they ignored inflation. Now they are trying to make up for it.

So yesterday, the surprised the market by raising the terminal rate to 5.1% from 4.6% when they last estimated. That was above the market expectations.

Today the stock market decided that if that’s what they’re gonna do, that would hurt earnings, increase the chances for a hard landing and therefore valuations are too high, and stock price should go lower.

Moreover the ECB put on their hawkish hats and raise rates by 50 basis points with reports that one third of the members were actually looking for another 75 basis point hike. That prompted the ECBs Lagarde to barter 2×50 at least which will be 3x 50 if inflation does not cooperate as expected.

Data did not help either as Retail sales, Philly Fed, Empire manufacturing and Industrial production/capacity utilization were all weaker than expectations.

As a result, in the US stock market, the price action responded by marking down the major indices:

  • Dow Industrial Average fell -764.15 or -2.25% to 33202.23 (largest decline since September 13)
  • S&P index fell -99.59 points or -2.49% to 3895.74 (the largest decline since November 2).
  • NASDAQ index fell -360.35 points or -3.23% to 10810.54 (the largest decline since November 2
  • Russell 2000 fell -45.84 or -2.52% to 1774.60

Not a good day for stock investors.

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