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11.10.2022 01:58 PM
US Premarket on October 11: general pessimism continues to put pressure on indices

Stock index futures are declining due to rising treasury bond yields, which are being observed amid concerns about persistently high inflation and the first signs that the company's earnings will disappoint in the third quarter of this year. The dollar index rose to its highest in a month.

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Futures for the S&P 500 and Nasdaq 100 fell by about 1.0%, indicating another day of risk aversion that will take place on Wall Street. Industrial Dow Jones suffered the least – futures fell by 0.4%. Technology companies, including Meta Platforms Inc., which are highly sensitive to the growth of rates, have suffered particularly badly in the premarket.

Ahead of the US inflation data, which is expected this Thursday, the probability of another 75 basis point rate hike is increasing daily. Despite the potential blow to economic growth, Fed officials still do not show much desire to suspend the rate hike cycle. In their interviews, they often declare that they will do anything to overcome inflation, even if it means sliding the economy into recession.

Despite the cycle of interest rate hikes, the US labor market remains in excellent shape, which will continue to accelerate inflation since retail sales are unlikely to decline seriously.

The yield on two-year Treasury bonds rose to the highest level since 2007, and the yield on 30-year bonds rose to the highest since 2014. The inversion of the yield curve with 10-year securities is obvious, which indicates a recession in the economy.

There were also shocks in the UK bond market, which weakened slightly on Tuesday as the Bank of England was forced to expand its emergency measures. The yield on ten-year UK government bonds, which has risen by more than 50 basis points since October 4, has fallen by six to about 4.4%.

In addition to inflation, major American banks are expected to open the reporting season for the third quarter at the end of this week. Many are preparing for weak profits amid warnings about the growing risk of a global recession.

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It is not surprising that investors start the week in a gloomy mood, especially in connection with the news from Ukraine, signaling a further escalation of geopolitical tensions.

As for the technical picture of the S&P500, yesterday there was another decline in the trading instrument. Now trading is below $3,608, which makes it difficult for the index to recover even in the short term. The bulls will expect a dash to $3,608 at the beginning of the regular session. But only a breakdown of this level will return the trend to an upward correction. The breakdown of $ 3,608 will support a new upward momentum, already aimed at the resistance of $3,645 and $3,677. The furthest target will be in the area of $3,706. In the event of further downward movement, the bulls will declare themselves in the area of $3,579, as it was already today. However, a breakdown of this range will quickly push the trading instrument to $3,544 and open up the possibility of updating support at $3,507 – a new annual minimum for the index.

Jakub Novak,
Especialista em análise na InstaForex
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