04.05.202209:27 Forex Analysis & Reviews: US stock market on May 4, 2022

S&P500

The Fed will raise rates today.On Tuesday, US stocks scored gains: the Dow added 0.2%, the NASDAQ grew by 0.2%, and the S&P500 increased by 0.5%.The S&P500 is at 4,175, staying in the 4,140–4,210 range.Markets await the Fed's decision this evening. The Fed is expected to raise rates by +0.5% and announce a reduction in the money supply (Fed asset balance reduction) at a rate of around $95bn/month. The reason for the rate hike is high inflation, at 8% p.a. The main interest is how decisive will the Fed's statement on future rate hikes be? Ahead of the Fed meeting, important reports came out. US GDP fell by 1.4% in Q1. Business activity in the industrial sector fell markedly in April. The labour market, however, remains very strong. Earlier, the Fed had anticipated an increase of 0.5% next time as well.The US market has rallied over the last two days. If the Fed is soft, markets will go higher.Oil is holding above $100. Brent is trading at $106 on Wednesday and rising by 1%.The EU continues to argue over the ban on oil imports from Russia. As far as is known, Hungary was promised to allow oil imports from Russia in exchange for not vetoing a common decision. However, media reports now say that Bulgaria and the Czech Republic may also ask for such an exception. The problem for the EU is that such an incomplete embargo would hurt the EU more than Russia. The Kremlin would make big profits from higher prices because of the embargo talk and still sell some oil to the EU.US oil inventories fell by 3.5m barrels over the week, more than expected.The ISM service sector index is due out today. It is expected to rise to 58% from 55.5%.USDX is at 103.50, trading in the 103.00–104.00 range.USDCAD is trading at 1.2630 in the 1.2500–1.2800 range.Further developments are highly dependent on the Fed's decision. A rise in the US market towards the highs of 2021-22 is more likely.Yesterday Russia carried out one of the most powerful shelling of Ukrainian cities in the west and centre of the country. There are casualties and, of course, destruction. Moscow's aim was to try to disrupt Western arms supply routes to Ukraine.There has been fierce fighting on the conflict line, with Russian troops continuously trying to attack Ukrainian positions.Yesterday, Emanuel Macron tried to persuade Putin to cease fire in a 2-hour conversation. However, this had no effect. The Pope's appeals to Putin for a ceasefire also had no effect.According to many experts, the conflict is culminating right now. Many believe that the Kremlin has two options - either go for a ceasefire soon or go on the offensive. We will probably hear Putin's position in his speech on May 9.