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24.05.2023 02:23 PM
US premarket on May 24: US stock market continues to decline

Futures on US stock indexes continued to drop, while short-term Treasury bonds rose. S&P500 futures declined by 0.4%, and the high-tech NASDAQ lost about 0.5%. The industrial Dow Jones dropped by 0.2%. On Wednesday, a batch of bad news hit the global markets, resulting in losses for European stocks, which were the largest in the past two months. Copper prices fell below $8,000, and the growth of Chinese stocks this year has been nullified.

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There are several reasons for investor pessimism: the debt ceiling negotiations in the US have once again reached no progress, increasing investor concerns about a default on June 1st this year. China's economy, with its slower-than-expected growth, and a deteriorating geopolitical situation are also affecting investor sentiment. In addition, the inflation reduction in the UK turned out to be less significant than expected.

Many economists are once again revising their forecasts downward, as a prolonged process of raising the US debt ceiling will undoubtedly impact future economic growth prospects. Experts are seriously suggesting that while a recession will likely be avoided this year, it will only be delayed until 2024. High-interest rates remain the main culprit, negatively impacting corporate profits.

Meanwhile, the yield on two-year US Treasuries has fallen, while yields on 10-year Treasuries have risen slightly. Investors continue to demand a premium for holding US debt, especially those with the highest risk of default. The yield on Treasuries maturing on June 6th was above 6% on Tuesday, compared to around 2% on Treasuries maturing on May 30th.

The rise in UK inflation has completely dashed investors' hopes that the Bank of England will pause its rate hike cycle this summer. Money markets are currently pricing in a peak rate of 5.5% for the Bank of England, implying a rate hike by the end of the year. The Stoxx 600 Index lost 1.7%, posting the biggest intraday drop since March 24.

In the commodities market, gold prices rose while crude oil futures remained near the day's opening levels. Rising copper inventories on the London Metal Exchange, which have nearly doubled since mid-April, point to weak demand.

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As for the S&P 500 index, it resumed its decline but buyers still have a chance to return within the borders of the sideways channel, although it is quite difficult to do so. Bulls need to keep the price above $4,116, from where a rebound to $4,150 may take place. In addition, Bulls should control the level of $4,184, which would allow the bull market to return. If the index declines amid ongoing national debt issues and weak US data, bulls will have to protect $4,116. Breaking through this level, the trading instrument may return to $4,090 and $4,064.

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