12.05.202214:27 Forex Analysis & Reviews: US premarket on May 12: collapse in US stock market continues

Futures on US stock indexes continue to fall, setting new yearly lows amid investor fears that the Federal Reserve will actively curb inflation. Futures on the Dow industrial index lost 118 points or 0.4%. Futures on the S&P 500 declined by 0.5% after yesterday's decline to their lowest level since March 2021. Futures on the Nasdaq 100 index dropped by 0.9% as investors were selling technology stocks trying to get rid of risky assets.

Yesterday, the inflation data showed that consumer prices jumped by 8.3% y/y in April, which was above the expectations of economists, who expected a decline to 8.0%. Prices remain near a 40-year high of about 8.5% and this is a major concern for the Fed. The report caused investors to continue selling risky assets, especially tech stocks and Bitcoin.

It's not just the US stock market. Investors are selling stocks all over the globe, and the market is getting gloomier. Yesterday, the Dow Jones index tumbled by 326 points or 1.02%. The S&P 500 index dropped by 1.65% and the Nasdaq Composite index lost 3.18%. The S&P 500 has plummeted by more than 17% since the beginning of the year. The Nasdaq Composite lost nearly 30% from its all-time high.

As for Bitcoin, its price declined to the area of $25,000 today. A large sell-off was due to fears of inflation and the collapse of the TerraUSD stablecoin, which spooked many investors and traders. UST, the so-called stablecoin issued by the Terra project pegged 1:1 to the US dollar, turned out to be not so "stable." Yesterday, it dropped to $0.23, which collapsed the Terra project and its token Luna. However, the main issue is not related to its fall, but the status of a stablecoin, which has to have a tight peg to the US dollar. Otherwise, it makes no sense at all. In general, the panic in the cryptocurrency market continues, and no one knows when it will end.Before start panicking, have a look at the bond market, which is actually showing unprecedented stability. This suggests that at any time investors can get back into the market and start buying cheaper assets, leading to a sharp spurt.

On the economic data front, investors will be watching the latest jobless claims data today. There will also be an update on the producer price index.

Premarket

Disney shares fell by more than 4% in premarket trading after reporting mixed financial results. The media giant reported higher-than-expected growth in streaming subscribers but warned of Covid's impact on the Asia region.

Apple lost 1% in the premarket, which was another reason that could push investors into another sell-off. Yesterday, the stock closed 19.9% below Wednesday's high.Ford and General Motors declined. Ford lost 2.8%, while GM stock declined by 3.4%. The drop came after Wells Fargo downgraded both companies twice to "below market" from "above market." Wells Fargo said 2022 could be a profit peak for older automakers, as the shift to electric cars will lead to lower revenues in the coming years.

Beyond Meat is among the top losers. Shares plunged by 26.3% in the premarket as the meat producer reported larger-than-expected quarterly losses that fell short of estimates.

Rivian Automotive shares jumped by 5.3% in the premarket despite a larger-than-expected quarterly loss and lower-than-expected revenue. The electric car maker maintained its 2022 production forecast, saying it expects supply chain issues to be resolved later this year.

As for the technical picture of the S&P 500

Inflation can make no change right now, as it is clear that the sell-off is highly likely to continue. Bulls need to protect $3,882, which could be tested immediately after the release of the US Producer Price Index. If the asset stays above $3,882 and rises from that level, it may boost the confidence of traders counting on an upward correction. However, it's too early to talk about hitting the bottom. A consolidation above $3,924 will open the possibility of returning to $3,964 and reaching $4,005. In case of pessimism and another talk about high inflation and the need to fight against it, bulls will have to protect $3,882. A decline in the trading instrument below this level would quickly push it to a low of $3,851. If you missed this level, it is better to postpone buying the trading instrument until it reaches the low of $3,823.