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S&P 500 futures contracts rose by about 0.4% but then returned to yesterday's lows. On Tuesday, the index fell at its fastest pace in a month. This was partly due to a 49% drop in First Republic Bank. Nasdaq 100 futures rose by more than 1% thanks to Alphabet, Google's parent company, and Microsoft, which rose in premarket trading.
Meta Platforms Inc. is expected to report earnings today after the opening of the regular trading session.
As for European benchmarks, they are also experiencing declines due to disappointing earnings from European companies. Shares of software manufacturer Dassault Systemes fell more than 8% due to the absence of future earnings guidance. Shares of Dutch chipmaker ASM International plunged by 10% after the company published a rather poor outlook for the remainder of the year.
Markets are heavily focused on earnings reports but there is a risk of overlooking the sharp slowdown in economic indicators, particularly in the US. The economic slowdown is likely to deter risk asset purchases in the near term, potentially leading to a larger market correction.
As for the treasury bond market, it has remained virtually unchanged after the yield on 10-year bonds fell by nine basis points on Tuesday, and the yield on policy-sensitive two-year bonds dropped by 13 basis points.
Concerns over US regional banks, triggered by a $100 billion fund outflow from First Republic, have somewhat eased after PacWest Bancorp announced that its deposit base grew in April, resulting in the Californian lender's shares surging more than 20%. Other mid-sized banks, including Western Alliance Bancorp, also showed growth.
In premarket trading, First Republic shares recovered by about 5% after rumors emerged that the lender was considering the sale of long-term mortgage loans and securities worth up to $100 billion as part of a rescue plan.
However, it is clear that the new banking problems we have repeatedly warned about are beginning to emerge. This raises questions about the impact of the Federal Reserve's aggressive tightening on the economy as a whole and on lenders in particular.
Oil prices rose, offsetting Tuesday's decline. Gold remained little changed. Bitcoin rose for a second day.
As for the S&P 500 index, demand for risk assets is decreasing, and further index growth will occur after bulls manage to break above $4,090, piercing the level of $4,116. After that, the index may soar to $4,150 and $4,208. In addition, bulls need to control $4,229, which will allow them to strengthen a new bull market. If the price decreases amid rising risks of further interest rate hikes and ensuing recession, bulls will have to protect $4,064. If this level is broken through, the trading instrument may be dragged to $4,038 and $4,010.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
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