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US stock market rally continues

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    2023/02/27
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Last week the dollar index dropped, while the stock prices continued to rise. On Monday and Tuesday, the US assets increased in price because of the absence of significant economic data. The US president Donald Trump reported that he would publish his economic program in upcoming weeks. This caused a surge of enthusiasm among investors. The likelihood of the Fed rate hike at the next meeting on March 15, 2017, was 21% on Monday.

On Tuesday, the Fed Chair Janet Yellen spoke mentioning the positive trends in the US economy and confirming the determination of central bank to increase rates. After that, according to the FedWatch futures, the probability of the three Fed rate hikes in 2017 advanced from 33% to 41%. An additional positive for the US dollar was the weakening of the euro on the background of the heightened political risks ahead of the presidential elections in France and ahead of Greece receiving the next IMF tranche. In the stock market there was a good growth in the financial sector, which may benefit the most from the rate hikes. Besides, the stocks of car-manufacturers increased due to the report from General Motors to sell its European business Opel.

On Wednesday, the US stock indices rose and once again updated historic highs. Positive economic data contributed to this. The retail sales for January advanced more than expected. The dollar index increased as well but closed the day lower. The US inflation for January amounted to 2.5% year-over-year exceeding the Fed targeted level of 2%. Theoretically, this shall increase the likelihood of the Fed rate hike and at the beginning, the US dollar strengthened. However, later, the Fed Chair Janet Yellen reported that the rate policy would depend on the reaction of the US economy on tax cuts within the frameworks of Donald Trump’s economic program. This resulted in the disappointment of investors and the dollar index declined. On Thursday, its negative trend continued. In the US stock market, prices decreased a bit. Because of the lack of important economic statistics, the probability of the rate hike at the March Fed meeting slumped from 31% on Wednesday to 18% on Thursday.

On Friday, as well, no significant economic data came out in the US. The dollar index rose and retraced some of its losses due to increased political risks in Europe. The stock prices also slightly advanced. In France, the “National front” candidate Marine Le Pen received a surprising number of votes in preliminary ratings. This resulted in the weakening of the euro against the US dollar. Marine Le Pen favors holding a referendum on France’s leave from the European Union. This week few US economic statistics will be released. On Wednesday, the February Fed meeting minutes and the real estate market data will be published. On Friday, the Michigan University consumer confidence index will be released.

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