Indices and Stocks in the Red

Indices and Stocks in the Red

2022-11-22 • Updated

The stock market has reversed, and now it’s going lower and lower. What to expect? Let’s try to look through this situation for stocks and indices trading.

The current situation

Nasdaq (US100) and S&P 500 (US500), the major US stock indices, have lost roughly 12% to 25% this year. After two years of gains, it’s a painful drop. Now that the S&P 500 tested levels below 4050, the downside risk is 3800, or even 3600. A drop to 3800 would mean a loss of 21.18% since the beginning of the year.

US500Daily.png

The decline of the S&P 500 is mainly due to interest rates hikes. The rates are now at higher levels than the bank expected just a couple of months ago. Investors expect the Fed to raise the interest rate by another 100 basis points this summer.

Economic growth slowed, contracting 1.4% in the first quarter, and stocks have been hurt as tech and growth stocks continue to reprice in a new, more hawkish Fed policy.

The recession

According to a JPMorgan strategist, stock markets in the US and Europe estimate a 70% chance that the economy will slide into recession in the near future.

Recession warnings have sounded for months this year amid the war in Ukraine, coronavirus lockdowns in China, and a more hawkish Fed policy. Worries that policymakers' efforts to curb inflation will send the economy into recession have led investors to take nearly $10 trillion out of US stock markets this year.

While signs of a weakening economy are everywhere, it remains difficult to detect that a definite recession is approaching. Manufacturing and service activities haven’t reached their peak but are still expanding, consumers continue to spend, and employment and housing data are at the normal level.

If recession fears don’t materialize, restrained stock positioning and the reversal of the pessimistic sentiment will help the stock market recover.

What to expect?

According to analysts, similarly high chances of a recession have historically indicated further capital losses when a recession materializes. However, stocks tend to rise when the worst doesn't happen: the S&P 500 jumped 12% over the next 12 months. Analysts estimate that the market will be poised for an economic downturn and earnings recession if the S&P 500 falls below 3800.

Now analysts see valuations drop even further before the unpleasant decrease in the stock market ends, and earnings results will likely disappoint through 2022.

Similar

TESLA Earnings Report Outcome Forecast
TESLA Earnings Report Outcome Forecast

In a call scheduled for January 25, 00:30 am GMT+2, the Tesla Inc. team will publish the company's earnings for the final quarter of 2022 and comment on the results, projections, and outlook for the nearest future of the company.

Will NETFLIX surprise investors?
Will NETFLIX surprise investors?

The Netflix stock (NFLX), with a market cap of $145.17B and a whooping 10 000+% rise since its inception 16 years ago, experienced some turbulence for a short period last year while trading around the $250 share price. However, the NFLX stock quickly recovered and rose to over $300 towards the end of the previous quarter of 2022.

Q4 2022 Earnings Report
Q4 2022 Earnings Report

The Q4 earnings season has been interesting, mainly because of the turbulent global economic outlook. On this premise, analysts forecast a disappointing performance for several stocks ahead of the Q4 earnings report publishing.

Latest news

Will USDJPY slide lower in 2023?
Will USDJPY slide lower in 2023?

Last year was tough for the Japanese yen. USDJPY gained more than 30% over 2022, striking above 150 in October. While anticipation of slower Fed rate hikes pulled the pair below the 130 level at the start of 2023, the speculations over the destiny of BOJ’s yield control policy grabbed the attention of the Japanese assets in the middle of January. What lies ahead for traders of the Japanese yen?

BoC Rates Could Alter The Trend on USDCAD and others
BoC Rates Could Alter The Trend on USDCAD and others

Today, at 5:00 pm (GMT +2), the Bank of Canada will publish the Overnight Rate, which represents short-term interest rates, and is pivotal to the overall pricing of the Canadian Dollar in the global markets. Let's look at how the markets are faring ahead of the BoC rates release.

MSFT faces gloomy forecasts ahead of earnings report
MSFT faces gloomy forecasts ahead of earnings report

In a call scheduled for January 25, 00:30 am GMT+2, Microsoft will publish the company's earnings for the final quarter of 2022 and comment on the results, projections, and outlook for the nearest future of the company.

Deposit with your local payment systems

Feel the Team Spirit

Data collection notice

FBS maintains a record of your data to run this website. By pressing the “Accept” button, you agree to our Privacy policy.

Callback

A manager will call you shortly.

Change number

Your request is accepted.

A manager will call you shortly.

Next callback request for this phone number
will be available in

If you have an urgent issue please contact us via
Live chat

Internal error. Please try again later

Don’t waste your time – keep track of how NFP affects the US dollar and profit!

Beginner Forex book

Beginner Forex book will guide you through the world of trading.

Beginner Forex book

The most important things to start trading
Enter your e-mail, and we will send you a free Beginner Forex book

Thank you!

We've emailed a special link to your e-mail.
Click the link to confirm your address and get Beginner Forex book for free.

You are using an older version of your browser.

Update it to the latest version or try another one for a safer, more comfortable and productive trading experience.

Safari Chrome Firefox Opera