March 26, 2023
Stocks returned as economic data support the tightening comments
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Stock & Indices

Stocks returned as economic data support the tightening comments

After almost four weeks of decreasing, the USD index trying to get its strength back, as US economic data downplay the less hawkish expectations. While after falling US inflation market was betting on lowering the pace of rate hikes in the next Fed meetings, EU inflation, US retail sales, and employment data, reminded the need of continuing the tightening policies.

Eurozone inflation still increasing.

After Wednesday’s upbeat retail sales numbers, today’s housing data and labor market numbers also increased the market’s positive sentiment. US Building Permits in October raised by 1.526M units, which is much better than 1.512M estimates. Also, 1.425M unit Housing Starts in October, was better than 1.425M united market estimates. Later on Thursday, US Labor Department data showed that the number of Americans filing for unemployment insurance fell by more than expected for the week ended November 12. Seasonally-adjusted initial jobless claims dropped to 222,000 last week, while the consensus expectation was 225K. This number increased the four-week average to 221,000 from last week’s level of 219,000.

Earlier today in the EU season, we had Eurozone inflation numbers. While Core CPI at 5% was in line with expectations and CPI at 10.6% came less than estimates, both of them have increased from last month. September Core CPI was seen at 4.8% and CPI at 9.9%.

After these data and hawkish comments from most FOMC members in their speeches in recent days, today’s dollar index, which measures the US dollar value against six major peers, rose 0.7% to 107.26. As these data mean that we should not focus too much on the less hawkish Fed, and some of the FOMC members still believe in continuing tightening policies, Wall Street reacted negatively.

In the first trading hours, Dow Jones Industrial Average fell by 0.9%, SP500 lost 1.3% and Nasdaq Composite traded 1.36% lower. From the technical point of view, NASDAQ returned to the downtrend in the smaller timeframes, while in the larger timeframes, the recently seen increase was somehow a pause in the overall downtrend. Further in the downtrend 11,380 and 11,180 as the next targets as the S1 and S2. On the flip side, if the price cannot breach the first support, a return to the bullish trend is more likely.

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