02.08.202109:39 Forex Analysis & Reviews: US stock market my slip into correction

Last week, big US companies continued to publish their earnings reports. Stock indices maintained their bullish momentum yet there were signs of the upcoming correction.

At the end of last week, most of the US major indices declined. The Dow Jones dropped by 0.4%, the NASDAQ Composite decreased by 0.7%, and the S&P 500 index fell by 0.5%. The Us economy grew at a 6.5% annual rate in the second quarter, while economists had predicted an increase of 8- 9%. However, such a result is still quite positive taking into account the size of the US economy. Besides, it is another sign that the country has achieved a sustained recovery from the pandemic recession. The total size of the economy has now surpassed its pre-pandemic level. Earlier, stocks rallied following the results of the FOMC Meeting. Last week. the Fed said that it was not going to change its ultra-soft monetary policy yet despite rising inflation. It has already reached the target of about +5% since April.

As for the commodity market, oil prices hit their highs last week. Brent crude is declining moderately in the morning by 1% to $74.70. In Europe, there is a shortage of gas supplies. Prices have risen to $500 per thousand cubic meters, the level last seen in 2008. Back then, oil rose to $140 per barrel. Gazprom has suspended gas injection into European gas storage facilities over the weekend. Since the beginning of August, Russia has increased oil export duties by about 10% to $67 from $61 per ton.

Asian stock markets showed a big increase at the opening of the week. China's stock market added by 2.4%, and Japan's rock market grew by 1.7%. Investors seem to reallocate finds from the US stock market, which is at highs, to markets that have not yet shown strong growth since the beginning of the year.

There has been a decrease over the weekend in the new coronavirus cases. Yesterday, there were recorded 466,000 cases. The death toll totaled 7,000. The US posted a sharp drop in cases to 21,000. In Russia, the number is still high and amounts to 23,000 cases. The death toll climbed to 800 per day.

The S&P 500 index is trading in the range of 4,350-4,430. This week is going to be quite eventful. The US will unveil the ISM manufacturing index, US Services Business Activity Index and weekly jobs report for July r on Wednesday and Friday. This is why the US stock market may enter the correctional phase.

The US dollar index is trading at 91.90. It is likely to stay in the range of 91.60-92.20. The US dollar lost momentum after the Fed's meeting. Yet, its decline is likely to be short-lived.

The USD/CAD pair is trading at 1.2460. It is likely to trade in the range of 1.2350 -1.2500. The loonie asserted strength against the greenback. However, high oil prices are weighing on the pair.

Therefore, the US stock market is likely to slip into correction in the foreseeable future.