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16.12.202109:11 Forex Analysis & Reviews: US stock market on December 16, 2021

S&P500

US stock indexes rallied on Wednesday, as the Federal Reserve agreed on tightening monetary policy.

Following the Fed's decision and statements by the Fed's chairman Jerome Powell, main US indexes closed in positive territory. The Dow Jones gained 1.1%, the NASDAQ jumped by 2.1%, and the S&P 500 added 1.6%.

Asian markets also went up early on Thursday, with the Nikkei 225 rising by 1.9% and the Shanghai Composite advancing by 0.1%.

The price of Brent crude oil slightly increased, gaining $1 and reaching $74,40 per barrel.

Electricity prices in the EU reached a record high level, with average prices in Germany reaching €350 per MWh - a jump of 300-350% compared to the similar period in 2020. Soaring natural gas prices pushed up the cost of electricity, with commodity prices currently remaining above $1,000 per 1,000 cubic meters.

The fourth wave of COVID-19 continues, with 713,000 cases reported worldwide. Yesterday, 135,000 new infections were registered in the US. The amount of new cases reached 78,000 in the UK, 65,000 in France and 55,000 in Germany.

The S&P 500 is trading at 4,710 and is expected to stay in the 4,670-4,750 range.

At the FOMC meeting on Wednesday, the Federal Reserve decided to accelerate the wind down of its asset purchase program by $30 billion. QE would be fully ended in March 2022. Although the Fed's statement had no mentions of a possible interest rate increase, the Wall Street Journal reported that the regulator could hike the rate three times in 2022 due to soaring inflation. In November, prices soared by 6.8%, extending the period of high inflation which started in April. Although Jerome Powell admitted that the labor market has not yet fully recovered, the Fed was forced to react to the rising inflation. Nevertheless, the markets rallied on Wednesday, pushing towards new yearly highs. The rally could continue until Christmas.

The Federal Reserve revised its projected GDP growth for 2021 down to 5.5%, compared to 5.9% in September. The projected unemployment rate was revised from 4.8% to 4.3%, while the projected inflation rate was adjusted from 4.2% to 5.3%.

US crude oil inventories declined by 4.8 million barrels over the week, the US Energy Information Administration reported.

U.S. retail sales were significantly weaker than expected, going up by 0.3% in November, as rising prices started to affect consumer demand. Economists predicted an increase of 0.8%.

USDX is trading at 96.40 and is expected to stay in the 96.00-96.80 range. The US dollar index jumped towards yearly highs on the Fed's statement, but quickly retreated afterwards. Investors are now eyeing today's meeting of the ECB. While the EU's regulator is expected to leave the interest rate unchanged, the statements by ECB president Christine Lagarde could influence traders.

USDCAD is trading at 1.2840 and is expected to stay in the 1.2780-1.2900 range. The pair reached 1.2920 alongside USD but lost its gains later. USDCAD is likely to encounter strong resistance at 1.2920.

The US stock market is likely to extend its rally until Christmas.

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Jozef Kovach,
Analytical expert of InstaSpot
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