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US stock market slumps

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S&P500

The US stock market fell again.

On Tuesday, US stock indices started losing value at the beginning of the trade. They lost over 2%. This is the second slump that occurred amid the current correction. The first decline was recorded on September 20. Thus, on Tuesday, the Dow Jones Industrial Average closed with a drop of 1.6%, NASDAQ lost 2.8%, and the S&P500 sank by 2%.

Asian stock indices also decreased following the US market. Thus, Japan's index dropped by 2.2%, whereas China's index declined by 0.37%.

Oil also depreciated amid the US stock market collapse. On Wednesday, Brent crude slid to $77.60 per barrel from $80 per barrel, losing 3%. Oil prices were also pushed down by the US oil reserves report that unveiled a jump of 4 million barrels. Last week, oil reserves declined by 2 million barrels. At the same time, the UK has unexpectedly faced a petrol crisis. Up to two-thirds of outlets had run out of fuel, thus causing long queues at petrol stations. The UK authorities explained the shortage by supply disruptions. Notably, the petrol crisis is taking place amid extremely high gas prices in Europe and gas deficit in the UK storage facilities.

On Tuesday, markets fell after Jerome Powell's speech. He said that although the economy was ready for the reversal of the Fed's stimulus programs, the employment rate was still far from the target. He also added that the key interest rate hike would hardly happen in the near future.

At the same time, the number of new virus cases is gradually falling. Thus, there are less than 500 thousand new cases a day in the world. However, the US again reported more than 100 thousand infected people a day. Death toll is also very high. Yesterday, 1.8 thousand people died.

S&P500 is trading at 4,352. The expected range is 4,320–4,390. Analysts failed to find any strong reason for a decline in the US stock market. It could be caused only by the growth of US government bond yields above the psychological level of 1.5%. The yield began rising just after the Fed said about the upcoming QE program reversal.

The current yield of US government bonds makes the US economy one of the most attractive. That is why yesterday, the pound sterling dropped by 150 pips. During the last five trading sessions, the US dollar jumped by 200 pips against the yen. Thus, the drop in the US stock market is considered as a normal correctional process. The S&P500 decreased by 5% compared to its yearly high. In fact, the downward correction may push the index lower. After a decline, investors immediately began opening buy positions. That is why the indices may jump soon. Meanwhile, the US economy continues growing, though at a slower pace compared to the previous quarters.

USDX is trading at 93.60. The expected range is 93.30–93.90. Yesterday, the US dollar hit its yearly high. Although the greenback advanced against the pound sterling and the yen, it showed tepid dynamic against other major currencies. Thus, the euro is still resisting its major rival. Today, the most important question is whether the euro will follow the pound sterling or not.

USD/CAD is trading at 1.2670. The expected range is 1.2620–1.2720.The pair rebounded after a slump caused by the greenback's rise and lower oil prices.

Conclusion: The US stock market is highly likely to jump in the near future.

The material has been provided by InstaForex Company - www.instaforex.com