17.01.202209:15 Forex Analysis & Reviews: US stock market in phase of correction

S&P500

The US market is experiencing a correction.

Major US indices gained on Friday, but the market continued to correct. On Friday, the Dow Jones Industrial Average lost 0.6%, the NASDAQ Composite added 0.6%, and the S&P 500 rose by 0.1%.

Asian markets also showed growth on Monday morning: Japanese indices gained 0.7%, Chinese indices added 0.9%.

Energy market. Oil edged higher on Friday. Brent crude oil advanced by 2 dollars to $86.40 per barrel. Now oil is trading almost at the highs of 2021, which coincide with the highs of 2018.

Statistics on the Chinese economy turned out to be upbeat. China's GDP grew by 4.0% in the fourth quarter compared with a year earlier, better than forecasts for 3.8% growth. Industrial production rose by 4.3% in December from a year ago. The unemployment rate in China stood at 5.1%.

S&P 500: 4,662. Trading range: 4,640 - 4,670.

Friday's report showed that US retail sales dropped by 1.9% in December. Excluding autos, retail sales sank by 2.3%. Apparently, a rise in prices in recent months has had a negative impact on buying activity. Besides, the University of Michigan said its preliminary consumer sentiment index fell to 68.8 from 70.6.

This week's macroeconomic calendar is bereft of any important releases from the United States. Data on housing starts in December and existing home sales will be published on Wednesday and Thursday respectively.

The epidemiological situation in the world remains challenging, although the number of new coronavirus cases declined yesterday. Global cases stood at 1.94M, slightly below 2M. The US reported 288,000 new infections, France - 278,000, and India - 258,000. Notably, the global spread of the omicron variant slowed down sharply. The death rate did not exceed pre-omicron levels. In Britain, where the omicron outbreak began earlier than in other developed countries, the number of cases decreased by 3 times from the peak posted on January 4 to 70,000. The mortality rate is low, about 0.1% of all registered cases. In Russia, the omicron strain is just beginning to spread. Yesterday, the country reported 29,000 new cases, with strong growth in Moscow and St. Petersburg.

The US market is experiencing a correction. The S&P 500 index closed below its 50-day moving average on Friday. New waves of a corrective sell-off are possible.

The largest US bank JPMorgan reported a 14% drop in fourth quarter profit to $10 billion. However, the indicator turned out to be well above analysts' forecast. Revenues remained almost unchanged at $30 billion. Analysts believe that banks will be one of the few sectors to benefit from the Fed's interest rate hikes.

USDX: 95.20. Trading range: 94.90 - 95.50. The US dollar index showed the first strong rebound from its decline initiated on January 11. For now, the dollar is trading downwards. This can be attributed to Federal Reserve Chair Jerome Powell's soft rhetoric on the issue of raising rates amid inflation standing at 7%, the highest level in 40 years.

USD/CAD: 1.2540. Trading range: 1.2500 - 1.2580. The pair is trading under pressure from higher oil prices. Thus, the quotes are likely to continue losing ground.

Conclusion: The market situation is mainly stable. The US stock market is experiencing a correction. New losses are possible. The omicron variant of coronavirus in the US and Europe is spreading at a slower pace, with mortality at low levels.