US stock indices on Thursday experienced a second strong drop after a sharp decline on Wednesday. The US market's fall reached the level of the 50-day average for the S&P500 index. Large investors factored in a drop that occurred this morning and the market closed near the opening prices. The Dow Jones declined by 0.2%, the S&P 500 index rose by 0.1%, and the NASDAQ Composite increased by 0.1%.
The correction took place following the publication of the Fed's minutes on Wednesday. Market participants are now widely expecting the Fed to announce the start of the bond-buying program tapering at the next meeting on September 21-22. If so, the regulator will begin to reduce asset purchases in November-December and completely stop the program by mid-2022.
Asian stock markets fell in the morning after the decrease in the US equity market. In Japan, the market shed 1% and in China -2.8%. The FTSE 100, the key UK index, tumbled by 1.5% yesterday
As for the commodity market, oil is stabilizing after a two-day fall. Brent crude is trading at $66.20.
The coronavirus is still raging across the globe. The number of new cases rises every day. Yesterday, there were 723,000 new cases. The US recorded 155,000 new cases and 967 deaths. In the UK, the death toll totaled 36. Some experts believe that the third wave is likely to ease soon. Yesterday's high does not exceed the high of a week ago on August 13.
The S&P 500 index is trading at 4.405. It is likely to stay in the range of 4.360-4.440. Yesterday, the US unveiled strong macroeconomic data. Initial jobless claims to 348,000 from 377,000. The number of continuing claims also declined to 2.82 from 2.9 million. The Philly Fed Index lowered to 19.4. from 22. The Composite Index of Leading Indicators, on the contrary, increased to 0.9% from 0.5%. The US economy remains strong. Yet, GDP is slowing down according to the Fed's minutes.
China adopted a new strict law on the protection of personal data on the Internet yesterday. Now, the largest Internet companies will have to obtain special permits for data collection. This is similar to the strict EU regulation on the protection of personal data. However, there is no doubt that this will not prevent the Chinese authorities from monitoring their citizens on the Internet.
The US dollar index is trading at 93.50. It is likely to remain in the range of 93.00-94.00. The US dollar took full advantage of the Fed's statement about a possible early change in the monetary policy. After a three-day growth, it hit the highest levels since November 2020. Judging by the technical analysis, this is a signal for an upward movement. However, the US dollar may halt its rapid rally until the Fed meeting at the end of September.
The USD/CAD pair is trading at 1.2860. It is likely to stay in the range of 1.2800-1.2900. The pair grew quite unexpectedly yesterday, recouping almost all losses incurred earlier. Technical indicators signal an upward movement. Besides, it gained momentum amid the strengthening of the US dollar and falling oil prices. However, it may face strong resistance levels of 1.2900–1.2950.
The US stock market is likely to stay in the correctional phase. So, it is recommended to open long positions only after sharp declines.
