Stocks Tumbled! Fed Rate Hike Concerns?

US:

Stocks tumbled. The U.S key benchmark indexes tumbled over 5% as a weekly loss. The most market-moving economic data this week come on Friday, with the announcement of the May consumer price index (CPI) inflation figure. The inflation statistics came in worse than expected, with the headline rate coming in at 8.6 percent year on year, up from 8.2 percent.

The Fed has most likely already approved 0.50 % rate rises for the June and July meetings, and Friday’s strong inflation data raises the likelihood of a 0.50 % rate hike in September. Markets are now pricing in a 62 % possibility of a 0.50 % rate rise and a 33 % chance of the Fed acting even more forcefully, with a 0.75 % rate hike.

Fed Rate Hike Probability in September:

Fed Rate Hike-Stocks Tumbled

Source: FactSet.

Following the release of the CPI, Treasury rates in the United States jumped sharply, with yields on short- and intermediate-term maturities climbing significantly.

Europe:

The European Central Bank (ECB) signalled that it may raise interest rates sooner than expected in July when it intends to terminate its ultra-easy monetary policy.

European stocks sank dramatically from about, -2% to -6% as the ECB hinted that interest rates might rise quicker than expected after July. Core eurozone government bond rates rose, owing mostly to the ECB policy meeting, which markets saw as more hawkish. Government bond yields in the eurozone and the United Kingdom generally mirrored those in the main markets.

APAC:

The APAC benchmark indices moved in a range of directions. The Nikkei-225, Hang Seng, and Shanghai indices all finished the week higher. The HSI-50 index from Hong Kong outperformed.

 The Chinese stock market soared in expectation of a looser monetary policy and signs that Beijing was loosening its years-long stranglehold on the technology industry. The indices, Nifty-50, Kospi-100, and ASX-200, on the other hand, fell by 2% to 5% on a weekly basis.

Underlying market movement:

Underlying-Weekly-6-13-2022-Stocks Tumbled

Oil prices rose for the majority of the week before dipping on Friday, resulting in a slight gain for the week and some support for energy sector companies.

Sentiment Analysis

Stocks tumbled. The general tone of the week has shifted from neutral to negative. In terms of attitude, the big US benchmark indices have turned neutral. The Russel-200 midcap index is up slightly this week.

The mood trend for European benchmark markets has shifted to the negative. The French CAC-40 and the Italian CAC-40 both exhibited a little downward trend for the week. The remainder, on the other hand, stays objective.

The mood trend for the APAC major indices Nifty-50, Nikkei-225, and Kospi-100 has shifted negatively. The Hong Kong index HSI-50, on the other hand, has been steadily rising this week. The remainder is unaffected

Sentiment Trend:

Sentiment Trend Chart-6-13-2022-Stocks Tumbled

The following critical economic indicators and earnings reports, which can alter current sentiment, may determine the market this week, including the Fed funds target interest rate and producer price data. (https://www.fxstreet.com/economic-calendar)

Sentiment Score:

Sentiment Values-6-13-2022-Stocks Tumbled

Note: The news sentiment data is the most useful additional overlay for your existing models to improve the performance further.

Buy & Sell Signals

The buy/sell signals generated by InfoTrie’s proprietary Investment/Trading models are shown in the table below. These models were built utilising technical, foundational, and quantitative methodologies, with the news-based sentiment score serving as a secondary overlay.

I tallied the random signals from different Trading/Investment models at InfoTrie.

Buy Sell-6-13-2022-Stocks Tumbled

The news sentiment score provides a significant improvement, significant “Alpha” compared to the traditional investment/trading models.

 For more details on the analysis, accessing complete tear sheets or white paper for the models, subscription details for News Sentiment data and other consulting works, don’t hesitate to contact us with the information provided below.        

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