The bulls did not have time to get enough of the approach to annual highs, as there was very quick profit-taking. Traders are nervous, as the meeting of the Federal Reserve System, which starts today and the results will be published tomorrow, makes us believe in a more aggressive approach of the Central Bank to its monetary policy.
Futures on major US stock indices declined slightly during morning trading on Tuesday after failing to stay above the $ 4,718 level. New concerns about the Omicron strain also negatively affected investor sentiment. Dow Jones Industrial Average futures contracts lost 10 points, while S&P 500 futures declined 0.2%. Nasdaq 100 lost 0.5%.
The news about Tesla led to a decline in shares even on the premarket. Why this happened, we'll talk a little below. Ford's papers also climbed down.
Another batch of US inflation data is expected today. The November producer price index will be published before the market opens. According to economists, prices for the month increased by 0.5%. This will be a slight slowdown compared to the 0.6% increase in October.
As noted above, the Federal Reserve begins its two-day meeting on Tuesday. On Wednesday, the Central Bank will release a statement with quarterly forecasts of the economy, inflation and interest rates. Chairman Jerome Powell will hold a press conference that will lead to a serious spike in volatility – but that's if expectations diverge from key results.
Many people believe that the Fed will act more harshly. Morgan Stanley CEO James Gorman said in an interview that, in his opinion, the Central Bank should start raising rates in the near future. "The Federal Reserve system should not delay raising rates, as this could lead to more detrimental consequences for the economy," Gorman said. He also believes that now it is necessary to act more aggressively in order to get a margin of safety for the future in case of something. If the Fed does not begin to stabilize its policy now, then in the future, if there is a need for additional stimulation of the economy, there will be nothing to help.
Most likely, today will be a calm day, and the market will maintain its bearish mood, and tomorrow investors will closely monitor comments on whether the Fed plans to accelerate the completion of its bond purchase program or not and when the first rate hike is scheduled. Currently, it is predicted that the Central Bank's asset purchase program will end in June 2022, but some officials have announced an earlier completion of purchases. If an earlier increase in interest rates is suddenly announced tomorrow, the US stock market will be significantly battered. Read more: The ECB, the Fed and the Bank of England will go their separate ways. How it will affect the market.
Yesterday, the Dow at the close of the day fell by 0.89%, or 20 points, while the S&P 500 fell by 0.9%. The Nasdaq Composite lost more than 1.39% as investors abandoned the shares of technology companies with a high valuation.
Now let's run through the premarket and talk about the news
According to financial statements released late on Monday, Tesla CEO Elon Musk sold 934,091 shares of his company for about $906.49 million. Musk also exercised options to buy 2,134 million Tesla shares with a strike of $6.24 per share granted to him as part of a compensation package in 2012. At the moment, Musk has millions of stock options at his disposal, which he needs to exercise by August 2022. Against this background, the company's securities sank by 2.3% in the premarket, and, most likely, the market will continue to decline at the opening.
The securities of the automaker Ford also fell - by 2.2%, after the news that by 2030 Toyota will invest up to $ 35 billion in electric vehicles, while in this area Ford is striving to take a leading position. Toyota itself fell, even more, its shares in the premarket fell by 3.4%.
Pfizer shares rose almost 1% after the final test results of the Covid drug showed that it reduced the number of hospitalizations and deaths by 89% among high-risk patients. However, then the paper sank again by 0.6%.
As for the technical picture of the S&P 500
The bulls failed to gain a foothold above the $4,178 level, which led to an instant sale of the trading instrument. Only a return above this range will allow us to count on the renewal of historical highs and the index's output in the area of $4,761 and $4,800. If traders fail to regain the $4,718 level today, and also fail to offer anything below $4,665, it is best to wait for a decline and correction to the $4,611 area and act more aggressively from there.