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The stock market has recently seen busy trading days. Three main US stock indices started their corrective move. Yesterday, the S&P 500, the Dow Jones, and the NASDAQ rebounded slightly upward. Anyway, the corrective move continues and the general trend remains bullish. A lot now depends on fundamentals. As a reminder, the US stock indices went down after Jerome Powell admitted that the current inflation rate that climbed to a more than 30-year high could no longer be referred to as "transitory". Apart from that, Powell said the regulator would discuss speeding up QE taper in a two-day meeting scheduled for December 14-15. Expectations of monetary policy tightening have increased significantly. This poses risks to stock indices and cryptocurrencies as investors usually sell risk assets when monetary policy tightens. Indeed, monetary policy could tighten substantially in the next couple of years. Interest rates are expected to be raised to 3% if the Omicron variant and other coronavirus strains do not trigger new lockdowns and an economic slowdown, which would require new stimulus. This means that the stock market is going to be bearish from now on as there will be fewer conditions for growth.
The United States has not published any important macroeconomic reports in recent days judging by the reaction of the market. On Wednesday, the ADP Employment Change was released. Nevertheless, the market rarely reacts to this data. It usually never comes in line with Nonfarm Payrolls. In fact, when the ADP jobs statistics beat expectations, Nonfarm Payrolls usually come shy of market forecasts. Clearly, Nonfarm Payrolls for November are of primary importance compared to the ADP jobs report. This time, the economy is projected to add 550,000 new jobs. If the reading comes in line or better than forecast, the US stock indices are likely to grow. At the same time, they might fall due to the possibility of monetary policy tightening by the Federal Reserve. In case of disappointing results, the US regulator might decide against speeding up QE taper because its primary goal is to return the jobs market to pre-pandemic levels. Today, the United States will also present data on unemployment, earnings, and the ISM Non-Manufacturing PMI.
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