Futures on US stock indices have dropped significantly compared to yesterday's closing prices. Apparently, there are not so many investors to buy cheaper assets, even at the current lows, as we could anticipate. The Dow Jones Industrial Average futures declined by 283 pips or 0.9%. The S&P 500 futures dropped by 1.3% at once, and the Nasdaq 100 futures lost 1.9%.
Yesterday, several representatives of the Federal Reserve started to talk seriously about the fact that the committee may decide to take a pause in the interest rate hike cycle this fall. This may well have led to a slight strengthening of the stock market and an improvement in the market sentiment. However, judging from earlier today, the optimism quickly faded. Raphael Bostic, CEO of the Federal Reserve Bank of Atlanta, said yesterday that policymakers could potentially hold off on raising interest rates in September after rising half a percent at each of their next two meetings. "I have got a baseline view where for me I think a pause in September might make sense. After we get through the summer and we think about where we are in terms of policy, I think a lot of it will depend on the on-the-ground dynamics that we are starting to see. My motto is observe and adapt," Bostic told reporters Monday following a speech to the Rotary Club of Atlanta.
Large drops occurred in the technology sector - as a rule, it is the sector that reacts most acutely to the deterioration of events and to what is happening in the world. Obviously, investors are trying to move their assets into safer so-called "income stocks" rather than "growth stocks" - this leads to even bigger sell-offs of risky assets. Shares of major tech companies like Amazon, Apple, and Netflix have each fallen by more than 1%.
All this comes one day after the market rebounded. The Dow jumped by 618 pips, or nearly 2%, in the regular session after a week of significant losses. The S&P 500 grew by 1.9% and the Nasdaq Composite increased by 1.6%.
However, it was not only the statements of Fed policymakers that boosted the market. Increased interest in the banking sector pulled some indices up. Banking stocks jumped substantially, and JPMorgan rose by 6.2% after the company said it would reach key targets earlier than expected thanks to an interest rate hike from the Fed.The US new home sales data will be released today, but more attention will be focused on Fed Chairman Jerome Powell's speech at the National Enterprise Development Center Summit. Reports will include Nordstrom, Best Buy, and Ralph Lauren.
Premarket
Shares of Snap fell by more than 29% after the company said it was likely to miss its profit and revenue targets for the current quarter while warning of a sharp decline in hiring. Against this backdrop, Meta Platforms declined by 6.7% in premarket trading, while Pinterest lost 12.1%.
Zoom Video's securities jumped by 6% after the company released a strong second-quarter outlook.
As for the technical picture of the S&P 500
During the regular trading session, only protection of $3,900 may become the starting point to build up new long positions in the trading instrument, which will strengthen the confidence of traders, counting on the upward correction. If bulls act more aggressively and do not let the trading instrument reach below $3,932, the target will be located at resistance of $3,975. If this level is breaken through, it may trigger a rally to the area of $4,013 and $4,042. In case of pessimism and another talk about high inflation and the need to fight it, as well as bulls showing lack of activity at $3,900, we are likely to see a large sell-off and a decline to $3,860. If the trading instrument declines below that level, it may quickly drop to new yearly lows of $3,818, and the next target will be located in the area of $3,779.
