Futures on US stock indices collapsed in morning trading on Wednesday. Still, they recovered as investors managed to digest the latest hawkish statements by representatives of the Federal Reserve System amid growing signs of a global economic downturn. Futures on the S&P 500 and Nasdaq 100 are trading in a slight plus, but traders remain tense ahead of the speech of representatives of the world's central banks in Jackson Hole. The yield on 10-year Treasury bonds remains above 3%.
Today, the president of the Federal Reserve Bank of Minneapolis, Neel Kashkari, said that inflation in the United States is very high, and the central bank should take measures to bring it back under control. "According to many indicators, we have maximum employment and very high inflation. This is a completely unbalanced situation, which means that we need to tighten monetary policy further to fix it," Kashkari said. "When inflation is 8% or 9%, we risk losing the binding of inflation expectations, leading to bad results. This forces the Fed to act more aggressively, in the spirit of Paul Volcker," he added.
Investors will be especially closely watching Fed Chairman Jerome Powell's speech at Jackson Hole on Friday to understand how hawkish the US central bank will be in the face of growing economic problems. Against this background, traders hurried to lock in profits, and the stock rebounded from the June low, which was stopped on the eve of the widely expected event.
The latest economic statistics disappointed, which only confirmed the weakening of activity, complicating the delicate task facing the Fed to raise interest rates to reduce high inflation without provoking a recession. Technically, given that we are seeing an inversion of the US bond yield curve, the US economy is already in recession.
Natural gas prices in Europe continued to rise, and disruptions at plants in the United States and Norway led to limited supplies from Russia. WTI crude oil rose above $ 94 per barrel, helped by a reduction in US inventories and a possible reduction in OPEC+ production.
As for the technical picture of the S&P500
The bulls managed to defend the $4,116 level today. In the event of a repeated downward movement after weak statistics, the breakdown of $4,116 will provide a direct road to the area of $4,090. The pressure on the trading instrument may decrease, as the index will approach fairly important support levels, breaking below which will not be easy – provided that buyers are in the market. It will be possible to talk about a new index growth only after controlling the resistance at $4,150, which will pave the way to $4,180 and $4,208. This is the only way we will see fairly active growth in the $ 4,229, where large sellers will return to the market again. At least there will be those who want to fix profits on long positions. A more distant target will be the $4,255 level.
