Weekly Market Review & Analysis For June 6, 2022

The major market S&P 500 index was up on Tuesday and Monday and bounced between our Mean Sup 4088 and Key Res 4177. But from the Wednesday session, all went downhill. It was an abrupt decline. As of Friday's close, the S&P 500 fell 5.1 percent for the week and was sitting as specified on Daily Chart Analysis For June 3 at our completed Outer Index Dip 3905. Here is the Year to Date (YTD) market results:

  • Nasdaq Composite: - 27.5 percent
  • Russell 2000 - 19.7 percent
  • S&P 500: - 18.2 percent
  • Dow Jones Industrial Average: - 13.6 percent

A condensed market news summary of this week's events can be summarized as a claim that the issue of growth was at the core of the matter. There were a variety of developments that contributed to these concerns:

  • Target has cut its Q2 operating margin forecast to around 2 percent; just three weeks after declaring, it was 5.3 percent, citing the necessity to eliminate the excess stock.
  • Intel said the macro-economic situation has been less favorable, and the current market conditions were direr than expected when the quarter began.
  • Scotts Miracle-Gro has cut its FY22 EPS estimates significantly below the consensus estimate and noted that its fixed-cost structure has been under considerably more pressure because of replenishment orders from retailers not meeting its expectations in mid-May.
  • WTI crude oil futures market reached up to $123.18/bbl, and natural gas prices reached $9.66/MMBtu.
  • The OECD reduced the 2022 world GDP estimate to 3 percent from 4.5 percent; the Atlanta Fed's GDPNow program estimate for Q2 was lowered to 0.9 percent from 1.3 percent.
  • The Reserve Bank of India and Reserve Bank of Australia have increased their key policy interest rate more than expected.
  • The European Central Bank (ECB) announced its plans to increase its interest by 25 basis points for the upcoming July meeting. It also said it would follow up with further rate hikes throughout September and possibly beyond. It also announced the program's termination to purchase net assets on July 1. It increased the forecast for 2022's annual inflation to 6.8 percent from a previously estimated 5.1 percent and the 2023 forecast from 2.1 percent to 3.5 percent.
  • Several Shanghai districts were put back in lockdown to conduct COVID tests, and entertainment and leisure venues within the Beijing district were shut down due to COVID-related crises.
  • June's Index of Consumer Sentiment recorded the lowest reading of 50.2 since 1978.
  • The Consumer Price Index (CPI) was up 8.6 percent Year-over-Year (YoY) in May, the most significant rise since December 1981. The core CPI was up 6.0 percent YoY and lower than 6.2 percent posted in April; however, it was still far from the Fed's more-long-term inflation target of 2.0 percent.

The latter was the final element in an otherwise disappointing market week. It led to worries regarding the Fed seeking to take more aggressive policy measures to control inflation, as the concerns surfaced within the U.S. Treasury market and the stock market on Friday.

The yield of the Two-year note spiked 22 basis points to close at 3.04 percent in the wake of the CPI report, while the Ten-year note yield increased 11 basis points, bringing it to 3.16 percent. The spread between these two notes was 12 basis points, compared to 27 basis points when the week session started.

The S&P 500 index, for its part, declined by nearly 3.0 percent on Friday's session, while the Nasdaq fell 3.5% on the broad-based selling momentum. The market participants' primary concern was not the alarming inflation data. More importantly, it was the realization that the Fed is likely to become more aggressive in its actions in the policy arena that could stifle the prospects for economic growth and, consequently, reduce earnings potential.

In the end, there were severe doubts about whether the market was providing an actual value at the current level as forward earnings estimates have not yet been reduced in any meaningful way, despite the abundance of evidence suggesting that the coming economic conditions are likely to be more difficult.

Market action

The market selling was widespread, completing the week with losses across the entire eleven S&P 500 sectors ranging from 0.9 percent to 6.8 percent.

The market sector with the best performance this week was the energy sector. It lost only 0.9 percent and was shielded from the mass selling that hit other sectors because of the energy cost increase. The second best performing sector is consumer goods which declined "only" 2.6 percent.

The sectors that suffered the most this week were the financial sector with a loss of -6.8 percent, Information technology with -6.4 percent and real estate with -6.2 percent, and consumer discretionary with -6.1 percent as well as materials posting -5.8 percent. On another important note, Dow Jones Transportation Average fell 7.5 percent.

There's a wealth transfer happening at the moment, and people are losing a lot of money in stocks, bonds, and the crypto market. The only thing that has risen on Friday is silver and gold after they knocked it down. The market controllers got gold down to $1825 and silver to $21.28. Gold closed traded at $1871, up $20 for the week, and silver closed at 21.87, down 4 cents for the same period.  

The Eurodollar got clobbered during the week, mainly on Thursday and Friday trading sessions, as shown on our Daily Chart Analysis For June 3, with the Meen Res 1.077 being the main culprit with the 1.04, 1.03 level will come into focus as likely support.

This article was printed from TradingSig.com

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