Markets Participants Weary of Rate Hike 

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Alex Partida

Dec 09th 2022  .  3 min read

Markets Participants Weary of Rate Hike 

Before the opening bell, the Producer Price Index (PPI) released its numbers at 8:30 a.m. Eastern. The median forecast for this report was 0.2%. The data revealed a higher number, coming in at 0.3%. This number sent futures tumbling 60 points from the pre-market highs.

This adverse reaction may indicate that market participants are weary of another rate hike as the Fed continues to wage war on inflation. Every unfavorable economic report increases the probability that the Fed pivots from its plan to let up. 

Also, the Producer Price Index report may foreshadow a higher-than-expected U.S. Consumer Price Index (CPI) report due next Tuesday. If CPI indicates inflation is higher than expected, it might be the catalyst that pushes the market lower through key levels of support. 

Tech stocks lead opening drive

When the opening bell sounded, the market started to recover from the free fall across the indices pre-market. This push higher was once again led by stocks in the technology sector. Netflix, Inc. (NFLX), Google (GOOGL), and Amazon (AMZN) led the charge higher out the gate. This group of names held strong for most of the day. If the market finds a bullish catalyst next week, these stocks may be the first to move higher as they have shown relative strength. In addition, Nvidia (NVDA) and Tesla Motors (TSLA) showed strength today and may continue to do so next week if market conditions allow. 

After the market made the opening push, indexes across the board started to chop around the 21-day exponential moving average. Due to the lack of conviction, and overhead resistance, this set the markets up to trade sideways into the closing hour. 

During power hour, the market rolled over 30 points back to the low established pre-market from the PPI report. This sell-off may have seemed to come out of nowhere, but in reality, there is still a lot of fear in the market regarding next week’s catalyst. 

Biggest catalyst next week

On Tuesday, the U.S. Consumer Price Index (CPI) report will report before the cash open at 8:30 a.m. Eastern. 

On Wednesday, the much-anticipated Federal funds rate will be announced at 2 p.m. Eastern. Shortly after, at 2:30 p.m. Eastern, Federal Reserve (Fed) Chairman Jerome Powell will take the podium and give his remarks. 

The market is highly alert whenever Powell speaks and is more volatile than usual. Pairing the big rate announcement and Powell speaking, Wednesday should have fireworks to end the trading session. 

Market ends the week negative

The Nasdaq and the S&P 500 were negative to close the session. The S&P 500 closed down 0.74%, losing 29 points, while the Nasdaq closed down 0.70%, a loss of 77 points. The Dow Jones followed, closing down 0.92%, declining 310 points