US stocks declined sharply after a hawkish statement by Jerome Powell. The Dow Jones crashed by more than 650 points while the tech-heavy Nasdaq 100 index declined by more than 300 points. The CBOE VIX index rose by more than 20%. This happened after Jerome Powell hinted that the Federal Reserve would move to unwind the quantitative easing program. He warned that the variant could lead to higher inflation as supply logjams continued. This happened after the Chief Executive at Moderna warned that the company’s vaccine could be ineffective against the variant.
Some of the worst-performing equities in the United States were those in the hospitality, aviation, and office real estate sectors. For example, Southwest shares declined by more than 2.7% while United Airlines crashed by more than 4%. Boston Properties and SL Green also declined as investors became worried that demand for office space will decline. Similarly, hospitality companies like Airbnb, Marriott, and Hilton declined by more than 5%
The economic calendar will have some key events today since it is the first day of the month. Earlier on, Australia published the latest GDP numbers. The data revealed that the country’s economy struggled in the third quarter because of the lockdowns in New South Wales. There are signs that the country’s economy is recovering as evidenced by positive manufacturing PMI data. The market will receive the latest Swiss inflation and manufacturing PMI numbers. In the United States, Jerome Powell will continue his testimony while ADP will publish its estimate of jobs numbers.
EURUSD
The EURUSD pair declined sharply after a hawkish statement by Jerome Powell. It fell to a low of 1.2645 as it erased most of the gains it made earlier this week. On the four-hour chart, the pair moved to the 25-day moving average and is below the 23.6% retracement level. The Relative Strength Index (RSI) has also moved slightly below the overbought level. Therefore, the pair will attempt to pare back some of the losses as worries about the hawkish Fed fade.
US30
The Dow Jones index declined sharply in the overnight session. It fell to a low of $34,535, which was the lowest level since October 15. On the daily chart, the pair moved below the ascending trendline. It also moved below the 25-day moving average and the parabolic SAR dots. The index seems to be forming a head and shoulders pattern. Therefore, there is a likelihood that it will drop to about $34,000 in the near term.
SPX500
The S&P 500 index declined sharply on Tuesday. It fell to a low of $4,570, which was the lowest level since November 1st. It has been struggling after it rose to a high of 4,752 recently. The index also declined to the 38.2% Fibonacci retracement level. It also moved below the 25-day moving average. Therefore, the index will likely keep falling in the near term.
