17.11.202109:24 Forex Analysis & Reviews: US stock market on November 17, 2021

S&P500

Better-than-expected retail sales results have boosted both stock indices and the greenback.

The main US stock indices reached their year-highs on Tuesday. The Dow added 0.2%, the NASDAQ gained 0.8%, and the S&P500 climbed 0.4%.

The key Asian stock indices went down early on Wednesday, with China's index losing 0.2% and Japan's dropping by 0.35%.

Energy. Crude oil prices are falling on Wednesday. The Brent benchmark is trading at $81.50. An increase in retail sales in the US and a stronger US dollar have had a negative impact on oil.

COVID-19 worldwide: over 500K new cases were recorded yesterday. The US and Germany reported 87K and 40K new infections respectively. The UK and Russia registered 37K new cases.

The main indicators of the eurozone's leading economies, France and Germany, have updated all-time highs. At the same, European markets are on the rise despite a slow pace of economic growth in the EU and the US.

The S&P500 is traded at 4,700 and is likely to move in the range of 4,660-4,720.

On Tuesday, the US presented a retail sales report for October that logged a sharp increase in the reading. Thus, retail sales almost doubled from the previous period, beating market expectations. Retail sales soared by 1.7% in October. Excluding autos, sales were up 1.7% as well. On a yearly basis, the figures are 10% higher than a year ago. Sales at nonstore retailers recorded the biggest increase (4%), followed by sales at gasoline stations (3.9%) and building materials (2.8%). Car sales were up by 1.8%. The consumer market in the US can be described as booming if we also take into account the secondary home market in real estate.

The largest retailers in the US scored gains yesterday (up by 0.9%), driven by strong sales growth. Walmart expects sales to accelerate during the holidays season (Thanksgiving). Home Depot, the largest home improvement retailer, also recorded positive results. The company said it had not yet seen the impact of high inflation on consumer behavior.

Outlook for US stock indices. Analysts at Godman Sachs, the largest investment bank in the US, expect the S&P500 index to add just 9% and close at 5,100 at the end of 2022 (yesterday's closing level is 4,700). When comparing the forecast with gains as of September 16, we can see that the S&P500 has already increased by 25%. The market is likely to feel pressure from the slowing pace of economic growth as well as interest rate hikes by the Fed in the middle of the year. Anyway, experts expect the market to continue growing through 2022.

Pfizer announced it has submitted its application to the Food and Drug Administration for emergency authorization of its Covid-19 treatment pill. The company claims the drug can reduce the risk of severe illness and death by 89% if the virus is quickly diagnosed and the pill is taken in time. If approved by the FDA, the drug will be available at the end of this year.

The US dollar index is traded at 95.97 and is expected to move in the range of 95.70 - 96.30. The greenback showed a sharp increase, with the dollar index reaching 96.20, the high unseen since the summer of 2020. The greenback has added 2% against the basket of currencies since November 10. The euro dropped to 1.1300 versus the dollar yesterday. On November 9, EUR was traded at 1.1600 against USD. Overall, the currency fell by 300 pips. USD/JPY increased to the high of 114.80, unseen since 2018. While inflation is at its high, markets expect an increase in bond yields, as well as interest rate hikes, in the future.

USDCAD is traded at 1.2550 and is likely to stay in the range of 1.2500-1.2600. The pair went up along with the US dollar. The price is likely to encounter strong resistance at 1.2600.

Conclusion: The US stock market is expected to remain bullish. However, traders should refrain from going long in the long term. A deep market correction did not occur. The indices did not even approach the 50-day average. A full-fledged correction is expected.