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On April 18th, Federal Reserve Governor Waller stated that he is cautious about the need for interest rate cuts in the near term due to the energy shock caused by the war with Iran, and warned that the conflict could have a lasting impact on inflation. In his speech, Waller outlined two main scenarios. In the first scenario, if the Strait of Hormuz reopens and trade flows return to normal, officials will be able to ignore the surge in energy prices and shift their focus later this year to the weak labor market. He stated that if this scenario occurs, "I think one prospect is that underlying inflation will continue to decline toward the 2% target, which would make me cautious about cutting rates now and more inclined to support the labor market through rate cuts later this year when the outlook is more stable." However, he warned that oil prices and the overall market are underestimating the risks of a prolonged conflict. "On the inflation front, the risk is that the longer the conflict lasts and the longer energy prices remain high, the greater the likelihood that these high prices will permeate into other prices, as businesses will factor in the high costs of energy inputs when pricing." He stated that if this scenario occurs against the backdrop of a weak labor market, it will limit policy options. In this scenario, he would weigh the risks of higher inflation against a weaker labor market. "If the risks of inflation outweigh the risks of the labor market, it could mean keeping the policy rate in its current target range."Bank of Canada Governor Macklem: High energy costs are squeezing consumer and business investment. We will not allow rising energy prices to translate into sustained inflation.Bank of Canada Governor Macklem: We do not want to raise interest rates too early, but we are aware of the associated risks.Bank of Canada Governor Macklem: There remains “considerable uncertainty” regarding the continued impact on tanker shipping.Federal Reserve Governor Waller: Overall PCE inflation in March is likely to reach 3.5% year-on-year.

The US Stock Market Continues to Pull Back

Skylar Shaw

Apr 02, 2022 11:25

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S&P 500 Technical Analysis

On Friday, the S&P 500 sought to climb in the futures markets but gave back gains, indicating weakness. As a result, the market currently threatens the 4500 level in the futures market, which has previously been a key sector. As a result, it'll be fascinating to watch whether we can pull back much farther, possibly to the 50 Day EMA.


The candlestick's magnitude isn't particularly impressive, but it appears like the 4500 goal I suggested before will be tested. If we break it down further, the 50 Day EMA, which is at the 4400 level, makes a lot of sense, followed by the 200 Day EMA, which is also at that level. 


The market is still highly loud, and I believe it will continue to be so in the future. After all, there are a slew of confusing signals at the present, not least in the bond market, where many traders anticipate we'll see as many as eight interest rate hikes, while others say it's impossible.


Find a reason to go higher, but this is due to the fact that it is unconcerned about the underlying economy. Keep in mind that stock markets are about liquidity more than anything economic. If it were the case, the latest straight-up-in-the-air photo would not have taken place. 


That said, savage rallies are common in bear markets, so, while hope springs eternal, I'll be betting on the downside through options rather than directly in the market.


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