What happened?
US stocks ended sharply higher on Thursday, May 27, after a 7-week losing streak. The US500 surged 2%, and the US100 jumped 2.7%.
Retail solid earnings Thursday morning spurred markets early in the session, with such companies as Macy's, Dollar Tree (DLTR), and Dollar General (DG) raising their future forecasts.
Thursday's relief rally signals investors that despite the inflation headwinds that many companies face, consumers still have the money to spend. Moreover, a very strong labor market still underpins the overall economy. Overall, markets were hovering near oversold territory, and the rally resulted from decreasing recession fears.
Earlier, the hawkish Fed monetary policy raised investors' concerns. However, meeting minutes released on Wednesday indicated the majority of officials were strongly committed to rate hikes of 50 basis points at each of the next two meetings in June and July. So far this year, policymakers bumped short-term borrowing costs by 50 basis points earlier this month and 25 basis points in April. This information matched the investors' expectations, as the Fed sent a message they were serious about inflation without sending growth into a tailspin.
What to expect?
After the Federal Reserve increased the key rate by 0.75%, the inflation growth slowed down significantly. It signals the correctness of FOMC monetary policy, and the market feels it. If the economic data continues to please investors with its stability, the US stock market will have all chances for significant recovery, and an upcoming Amazon split only confirms it.
Technical analysis
US100, monthly chart
US100 has been moving inside the descending channel since the beginning of 2022. In May, the price has found the local support of 11 700. Currently, the price is forming a reversal formatting right above this support level, and the FBS analytics team expects to see a significant reversal to the upside. The closest target is 13 500. However, if the price breaks out of this channel, it might reach an all-time high value.
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