Major US stock indexes suffered massive one-day losses on Wednesday, comparable to the fall in October, amid growing concerns about problems with the spread of coronavirus vaccines. Thus, the S&P 500 index fell 3% on Wednesday, reaching a local intraday low near 3715.0.
Last Wednesday, the US Federal Reserve System, as expected, decided to leave its monetary policy unchanged. At the same time, the Fed allowed a further slowdown in the pace of economic recovery in the United States. The regulator left the rate in the range of 0.0%-0.25% and confirmed the preservation of the program of asset repurchase in the amount of $ 120 billion monthly. The rhetoric of statements by the FRS management has remained practically unchanged. Jerome Powell also stressed that it is too early to talk about winding up the bond purchase program.
Yesterday, the largest American corporations Tesla Inc., Facebook Inc. and Apple Inc., published their financial reports, which posted record profits in Q4 2020.
Among the growth leaders in the Nasdaq 100 index is Sirius XM Inc. (+4.89%), Walgreens Boots Inc. (+4.05%), Illumina Inc. (+2.74%), Moderna Inc. (+2.50%).
Nonetheless, market participants noticed the Fed's cautious tone on the pace of Covid-19 vaccinations, driving up demand for the defensive dollar and putting pressure on stocks. During a press conference, Fed Chairman Jerome Powell said that new strains of coronavirus are increasing market uncertainty and slowing down the US economic recovery.
Yesterday, the DXY dollar index rose markedly, climbing to an intra-week high of 90.88. DXY futures are traded near the 90.64 mark at the start of the European session today, corresponding to yesterday's closing price.
The renewed talk about the likelihood of curtailing the stimulus program from the Fed may support the US dollar, economists say.
Meanwhile, the difficulties in passing a $ 1.9 trillion aid package in Congress are also dampening investors' over-optimism, reinforcing their propensity to seek protection in a safe dollar amid the continued spread of the coronavirus around the world, and in particular due to new coronavirus outbreaks in China.
So, in an accompanying statement from the Fed it is said that the pace of economic recovery and further development of the economy will depend on the rate of vaccination of the population and the success of the fight against coronavirus.
Today (at 13:30 GMT), preliminary data on US GDP for the 4th quarter of 2020 will be published. Economic growth is expected to slow to 3.9% amid the second wave of coronavirus and the lack of new economic stimulus. Economists believe that overall US GDP will contract by 3.6% for 2020, but the pace of economic growth will accelerate by mid-2021, as the pandemic is brought under control. If new difficulties arise in the fight against the pandemic, the recovery of the economy and its growth rates will move to a later date, and this may become a new test for the stock market.
It is expected that the reaction of market participants to today's publication of data on US GDP will be restrained. Volatility will increase if the data is very different from the forecast values.