Stock indices try to resume an increase | IFCM
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Stock indices try to resume an increase

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    2023/02/27
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Last week, the US dollar index continued falling, while the stock indices slightly increased. On Monday, the market negatively reacted to the “anti-immigration” decree of the US president Donald Trump, which complicated the entry for citizens of 7 Muslim countries to the US. Both currency and stock markets declined. Political negative was partially offset by positive economic data. The consumer spending and the pending home sales rose in December 2016.

On Tuesday, the unexpectedly weak Consumer confidence index for January was published. This contributed to a significant weakening of the US dollar. In January, the US dollar dropped by 2.6%, which became its record decrease in 10 months and the worst beginning of the year in nearly 30 years. The stock prices slipped a bit. President Donald Trump met with the chief executives of the major US pharmaceutical companies. This calmed investors, and the NYSE Arca Pharmaceutical index advanced 1%. Let us recall, that previously the US president demanded to lower drug prices.

On Wednesday, positive economic data were published. The ISM Manufacturing PMI rose. The ADP independent agency reported the increase in the number of new jobs in January. This pushed US stock indices and US dollar up.

On Thursday, weak data on the growth of labor productivity in Q4, 2016 came out. In the last two years, it has been increasing by less than 1%. From 2007 to 2016, the average increase in labor productivity was 1.1% while from 1947 to 2016 - 2.1%. However, the stock indices advanced. The revision of the consensus-forecasts of the total earnings increase of the S&P500 companies to 7.5% according to the Q4 results, as well as some positive corporate news contributed to this. The US dollar index updated its low since mid-November, but then increased anyway. According to the futures prices, the likelihood of a rate hike at the next Fed meeting on March 15, 2017, does not surpass 20%.

On Friday, quite positive labor market data for January came out, and the factory orders increased as well. This contributed to a significant increase of stock indices and a slight strengthening of the US dollar. Donald Trump signed a number of decrees changing the regulation of the financial sector. This pushed the S&P financial sector index up by almost 2%. Investors’ pessimism regarding the Fed rate hikes prevents the strengthening of the US dollar. The probability of such an event at the meeting in June is estimated at only 60%. This week, few economic statistics are expected. On Tuesday, the trading balance and on Friday, the Michigan University consumer confidence index will come out.

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