S&P 500, Nasdaq 100 Body-Slammed on Recession Angst, April US Inflation Data

U.S. EQUITY OUTLOOK:

  • US stocks plunge early in the week, dragged lower by fears that the US economy is heading for a hard landing
  • S&P 500, Nasdaq 100 and Dow plunge into freefall and set new low for 2022
  • April inflation data, to be released on Wednesday, could be the next big catalyst for the stock market

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US stocks fell on Monday, extending the relentless selling of the previous five weeks, weighed down by recession fears and monetary policy angst. At the close of the market, the S&P 500 fell 3.2%, losing the psychological level of 4,000 and ending the afternoon at 3,991, its lowest level since April 2021. The Dow Jones, for its part , fell 1.99% to 32,245, deepening its run into correction territory. . Meanwhile, the Nasdaq 100 led the rout on Wall Street, plunging 3.98% to 12,187, a new low for 2022. after today retreatthe tech index is accumulating a 27% pullback from its 2021 peak.

There was no specific catalyst during the session that caused the monumental and general collapse, other than growth worry that the the rising interest rate environment needed to crush inflation could trigger a hard landing for the US economya dire scenario for corporate earnings and risky assets.

Although the likelihood of a near-term recession remains low due to a healthy labor market and strong consumer spending, the outlook is not static and could change in the short term. For exampleif the stock market continues to drop at the pace of recent weeks, confidence could deteriorate further Due to “wealth effect”, leading households invested in equities to sharply reduce their discretionary spending, a situation that could slow GDP growth.

Looking ahead, the US economic calendar lacks major releases on Tuesday, but Wednesday bring a high impact event: the last inflation report. For the feeling to improve, the the data should confirm that the consumer price index peaked in March and start to descend significantlyotherwise it is unlikely that the sales momentum decrease on Wall Street anytime soon. In terms of forecasts, the April CPI should enter at 8.1% y/y vs. 8.5% the previous month, while the base gauge is seen rising 6% y/y from 6.5% a/a previously.

NASDAQ 100 TECHNICAL OUTLOOK

The Nasdaq 100 plunged on Monday and set a new 2022 low after slipping below the March 2021 low near 12,210, an event with bearish implications for price action. If this breakout holds in the next few days, the selling pressure could increase, paving the way for a move towards the next critical support at 11,600, followed by the psychological level of 11,000. On the other hand, if buyers come back and the index manages to rally above the March 2021 low, the first hurdle to consider appears at 12,645 and 13,000 thereafter. With sentiment deteriorating daily and volatility rising, however, the path of least resistance is lower (for now).

Nasdaq 100 chart prepared using TradingView

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—Written by Diego Colman, Market Strategist

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