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U.S. equities focus more on positives than on negatives – Market Overview

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Miguel A. Rodriguez
Miguel A. Rodriguez
05 November 2022
Despite rising inflation forced Fed to bring forward the time frame on when it will next raise interest rates, the stock market focused on improved earnings expectations, strong GDP growth.

Indices lost upward momentum but remain at high levels. Yesterday, the Nasdaq technology index rose by 2%, with the leading stocks Amazon, Alphabet, and Facebook reaching historical highs.

U.S. Treasury Bonds did not seem to weigh in favourably the more hawkish forward guidance, as the 10-year benchmark fell to 1.51% yet again.

The performance of the North American fixed income market seems closer to Powell's discourse, who tried to downplay this more hawkish bias by trying to be less clear about the possibility of rate hikes and the beginning of the tapering process. However, he recognized that the economy and especially employment would rise strongly in the coming months.

This behavior contrasts with what the foreign exchange market is experiencing - a more robust U.S. Dollar compared to most of its competition, with the only exception being the Japanese yen.

Still, the U.S. Dollar’s price against the euro strengthened significantly due to the general weakness of the euro after the European Central Bank expressed its intention to continue with its asset purchase program. Although it sounds like some dissenting voice expressing concerns about inflation, the ECB officials said they will continue with an ultra-expansionary policy for as long as necessary until the European economic figures confirm the recovery and inflation figures.

The EUR/USD pair has plummeted since the Federal Reserve meeting, technically breaking down the 100-day SMA line. However, although the RSI indicators on the daily chart are at oversold levels, they are not giving signals of divergence. Therefore, the pair should not find any obstacles until the price concentration zone around 1.1750.

Sources: Bloomberg, reuters.com.

This information/research prepared by Miguel A. Rodriguez does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. The research analyst primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and their securities expressed in this report accurately reflect his/her personal views and consequently any person acting on it does so entirely at their own risk.The research provided does not constitute the views of KW Investments Ltd nor is it an invitation to invest with KW Investments Ltd. The research analyst also certifies that no part of his/her compensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in this report.The research analyst in not employed by KW Investments Ltd. You are encouraged to seek advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit that conforms to your specific investment objectives, financial situation, or particular financial needs before making a commitment to invest. The laws of the Republic of Seychelles shall govern any claim relating to or arising from the contents of the information/ research provided. 

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Miguel A. Rodriguez
Miguel A. Rodriguez
Financial Writer

Miguel worked for major financial institutions such as Banco Santander, and Banco Central-Hispano. He is a published author of currency trading books.