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03.10.202314:08 Forex Analysis & Reviews: US premarket on October 3: US stock market falls again

US stock index futures continued to fall, nearing yesterday's lows, as the risk of further interest rate hikes by the Federal Reserve faded. S&P 500 futures were down 0.3%, while the tech-heavy NASDAQ dropped by about 0.5%. Treasuries also resumed their declines as investors grew increasingly concerned about historically high borrowing costs.

Exchange Rates 03.10.2023 analysis

The yield on the 10-year US Treasury rose by three basis points to 4.71%, adding to yesterday's 10-point gain. The sell-off extended beyond equities to commodities, with Europe's Stoxx 600 index falling to a near six-month low and West Texas Intermediate crude trading near $89 a barrel. The US dollar index hit a 10-month high.

Several Wall Street experts have recently warned about the impact of rising interest rates on stocks, with Goldman Sachs Group Inc, Morgan Stanley, and JPMorgan Chase & Co. saying there is a risk of further stock market declines as the probability of a November rate hike is now estimated at one in three. "We had not anticipated such an increase in rates," Vincent Juvyns, global market strategist at JPMorgan Asset Management, said. "This is something which will at least slow down, or even reverse the progress of equity markets."

The decline in Treasuries continued this week after US lawmakers managed to avert a government shutdown, prompting traders to increase bets that the Fed will continue to tighten monetary policy by raising interest rates another quarter-point in November. Comments from two Fed chiefs bolstered that view, with Cleveland Fed President Loretta Mester saying on Monday that another rate hike would likely be needed, and Fed Governor Michelle Bowman calling for multiple increases.

Investors are now divided on whether or not central banks need to keep raising interest rates, and the bond market is testing their greed to the limit. With the 10-year bond yielding around 4.6%, the decision to buy equities is becoming quite difficult. It's hard to argue that the current high long-term yields are attracting the big players much more than the risky stock market. For this reason, do not be surprised if the stock market continues to decline in the near term and we see a repeat of the September lows.

Exchange Rates 03.10.2023 analysis

As for the S&P 500, demand for the index remains weak. Bulls need to take control of $4,304 and $4,332 to cancel the bear market. From this level, they may push the price to $4,357. Bulls also should take control of $4,382 to restore a market balance. If the index declines on the back of decreasing demand for risk appetite, bulls will have to protect $4,268. Breaking through this level, the trading instrument may plummet to $4,229 and $4,202.

*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.

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