This week, the Federal Reserve and the European Central Bank confirmed that they planned to keep raising rates until inflation returns to their targets. This contradicted market expectations, dampening growth prospects. Economists now see a 60% chance of a recession in the US and an 80% chance in Europe.
Markets worry that the maximum level of interest rates is still unknown. Investors wonder when all this will end and how much the actions of central banks will hurt the economy. Apparently, raising interest rates in the face of slowing activity will undoubtedly trigger a recession. The question is how deep the looming recession will be.
Treasuries fell and the yield curve became steeper. Two-year bonds added 2 basis points, while the 10-year bond jumped by 5 basis points. British and German bonds fell after ECB President Christine Lagarde made hawkish statements. Markets were left discouraged that any rate cut projections were unlikely to happen next year.
Traders also digested weak US retail sales and manufacturing data. however, the labor market remained strong. Crude fell on Friday, further rebounding from a weekly gain amid signs of contracting supply and the prospect of better demand in China.
As for the S&P 500 index, it may continue to fall. Bulls need to protect $3,835 today. As long as the instrument is trading above this level, we may expect demand to return. This is likely to strengthen the price and push it to $3,861 with the prospect of going to $3,894. At the same time, it is unlikely to go above $3,923. If the trading instrument declines, bulls will have to show their activity near $3,835. If the price goes below this level, the pressure on the index may increase. if this level is pierced from above, the price may go down to $3,808 and $3,773.
