US stock indices falling due to inflation concerns

Major stock markets in the United States posted sharp losses, as the Dow Jones Industrial Average posted its biggest drop since June 2020, following inflation concerns.

The S&P 500 Index closed down more than -4%, the Dow Jones Industrials Index closed down more than -3% and the Nasdaq 100 Index closed more than -5%. The prospect of lower corporate earnings, as well as rising prices and the prospect of slower economic growth from a tightening Fed weakened stock prices.

High-valued technology stocks also fell sharply, on the prospect of the Fed continuing to raise interest rates aggressively. In addition, concerns over China maintaining the lockdown weighed on stock prices and the outlook for global growth is getting bleak. Fed Chair Powell previously said that the Fed would not hesitate to tighten policy beyond neutral to curb inflation and would continue to raise interest rates until there is clear and convincing evidence that inflation is falling.

Chicago Fed President Evans’ comments also weighed on stocks as he said he sees a half-point rate hike in the upcoming FOMC meeting and after. He also said that he expects the economy to cool down because of the Fed’s tightening policies.

Technical Overview

USA100 posted a decline of -5.5% on Wednesday (18/05) with the total decline for May to date reaching more than -7% extending the -13% decline in April. Further downside is projected for 100% FE at 11,441 (from drawdowns of 16,767-12,944 and 15,264), if it manages to break through the 11,688 support with a continuation target at the 11,000 round-figure mark, before reaching up to the 61.8% retracement of the FR. The previous decline had bounced at the 50.0% FR retracement area last week. Further decline is expected to continue as long as the support at 12,944 which has now become resistance remains intact.

On the upside, a break of the 12,588 minor resistance will most likely test 12,944. However, a break of the resistance at 13,546 will bring the price bias back to the upside and confirm that the correction to the advance of 6,632 has paused at the level of 50.0% FR (from drawdowns of 6,632 and 16,767).

Click here to access our Economic Calendar

Ady Phangestu

Market Analyst – HF Educational Office – Indonesia

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distribution.