S&P 500, Nasdaq 100 body-slammed on recession angst, April US inflation data eyed
U.S. stocks plummet at the start of the week, dragged down by fears that the U.S. economy is heading for a hard landing and April inflation data, to be released on Wednesday, may be the next big catalyst for the stock market.
U.S. stocks plummeted on Monday, extending the relentless sell-off of the previous five weeks, weighed down by recession fears and monetary policy angst. At the market close, the S&P 500 sank 3.2%, losing the psychological 4,000 level and ending the afternoon at 3,991, its lowest level since April 2021. The Dow Jones, for its part, sank 1.99% 32,245, deepening its run into correction territory. Meanwhile, the Nasdaq 100 led the rout on Wall Street, plunging 3.98% to 12,187, a fresh low for 2022. After today's pullback, the tech index accumulates a 27% retreat from its 2021 high.
There was no specific catalyst during the session that caused the monumental and broad-base collapse, other than growing concern that the rising interest rate environment needed to squash inflation may trigger a hard landing for the U.S. economy, a dreadful scenario for corporate earnings and risk assets.
Although the likelihood of a near-term recession remains low due to a healthy labor market and strong consumer spending, the outlook is not static and could change with short notice. For instance, if the equity market continues to drop at the pace of recent weeks, confidence may deteriorate further due to the "wealth effect," leading equity-invested households to sharply reduce discretionary spending, a situation that could slow GDP growth to a crawl.
Looking ahead, the U.S. economic calendar lacks major releases on Tuesday, but Wednesday will bring one high-impact event: the latest inflation report. For sentiment to improve, the data will need to confirm that the consumer price index topped out in March and is starting to come down meaningfully, otherwise the selling momentum is unlikely to abate on Wall Street any time soon. In terms of forecasts, April CPI is expected to come in at 8.1% y/y from 8.5% in the previous month, while the core gauge is seen rising 6% y/y from 6.5% y/y previously.
NASDAQ 100 technical outlook
The Nasdaq 100 nosedived on Monday and set a new 2022 low after sliding below the March 2021’s trough near 12,210, an event with bearish implications for price action. If this breakout is sustained in the coming days, selling pressure could accelerate, paving the way for a move towards the next critical support at 11,600, followed by the psychological 11,000 level. On the flip side, if buyers return and the index manages to climb above the March 2021 low again, the first hurdle to consider appears at 12,645 and 13,000 thereafter. With sentiment deteriorating every single day and volatility on the rise, however, the path of least resistance is lower (for now).
This information has been prepared by DailyFX, the partner site of IG offering leading forex news and analysis. This information Advice given in this article is general in nature and is not intended to influence any person’s decisions about investing or financial products.
The material on this page does not contain a record of IG’s trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk.
IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.
The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.
No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk. Please see important Research Disclaimer.
Please also note that the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.
Take a position on indices
Deal on the world’s major stock indices today.
- Trade the lowest Wall Street spreads on the market
- 1-point spread on the FTSE 100 and Germany 40
- The only provider to offer 24-hour pricing
Live prices on most popular markets
- Forex
- Shares
- Indices
See more forex live prices
See more shares live prices
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.
See more indices live prices
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.