OUTLOOK S&P 500:
- S&P 500 to dive as Meta’s decline causes a deep sell-off in the tech sector, driving the broader market lower
- Shares of Facebook parent company Meta Platforms plunge 26% at closing bell, wiping out more than $252 billion from the company’s market capitalizationitalization
- Investors’ attention now turns to: Friday’s NFP report
Most read: What is the Non-Farm Payroll Report and how can I trade it?
US stocks fell on Thursday amid widespread weakness in technology roomcaused by a large drop in the number of Meta Platforms (FB) following disappointing quarterly results and poor forward–guidance. At the closing bell, the S&P 500 viel fell 20.44% to 4,477, ending a four-day winning streak and halting recent bullish momentum. Meanwhile, the Nasdaq 100 took the brunt of the sell-off and slumped 4.22% to 14,501 if shares of Facebook’s parent company plummeted 26%, making more than $2. is wiped out52 billion in the market capital letters in what was? are biggest one-day drop ever.
Strong profits from certain companies such as Microsoft (MSFT), Alphabet (GOOG), Tesla (TSLA), and Apple (AAPL) have helped stabilize the tech sector countLake this week after a brutal correction in January, but not all mega-caps perform well or deliver excellent results. with divergent gig, Wall Street is becoming more selective and will need other catalysts to feel confident before deploying additional capital go inside risky assets.
All in all, sostate of mind remains fragile, making it unlikely that shares will be a significant bounce backof current levels in the short term, especially amid mixed and unequal earnings.Increased volatility can also limit risk appetite, further preventing a sustainable recovery in shares.
From a macroeconomic point of view, the environment is becoming increasingly hostile to equities. For example, the Fed’s tightening cycle is a major threat, but there are still uncertainties about the process, especially how aggressive it will be in the face of rising inflationary pressures. Investors are discounting four rate hikes for 2022, but a fifth hike is slowly creeping into expectations.
The central bank’s normalization efforts do not have a predetermined course and forecasts are sure to change as new information about the economy becomes available. That said, the January Nonfarm Payroll Report coming out tomorrow morning may offer some clues about the underlying health of the labor market.
The consensus suggests: That employers added 150,000 workers last month, but many Wall Street firms are expecting a major wage drop, including Goldman Sachs, which estimates a loss of 250,000 jobs. The White House has warned that the latest NFP will be ugly, so it would be good to prepare for a negative surprise.
While a weak NFP print could be caused by the current COVID-19 wave (temporary), could still trigger recession talks on Wall Street, driving traders to price in a less aggressive Federal Reserve tightening cycle. This in turn could provide some respite for risky assets and boost equities, but we shouldn’t be shocked if gains don’t hold up amid the ruling “selling the rip mentality”, a phenomenon thatplayed out several times over the past few weeks.
S&P 500 TECHNICAL ANALYSIS
The Huge Drop in Meta Platform stock prices swept across the market, quelling the bullish sentiment and budding recovery in the equity space seen earlier this week. As a result, the S&P 500 took a sharp turn break below the psychological level of 4,500. If the index stays below this floor for the next few sessions, we could see a test of the 200-day SMA before a sustained move towards 4.280.
On the other hand, if bulls regain control from the market and drive the price higher, resistance is seen at this week’s high followed by 4,625, near the 50-day SMA. If the index manages to break above these barriers, buying pressure could increase, paving the way for a climb towards 4,750.
S&P 500 TECHNICAL CHART
S&P 500 (SPX) Chart by TradingView
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—Written by Diego Colman, Contributor