Stock Market Sentiment Falls On Negative News


Simpler Trading Team

3 min read

Another day of downside sentiment washed over the stock market as traders face a new week of uncertain “catalysts” influencing price action.

Catalysts are key events – such as economic reports, government banking meetings, or stock earnings releases – that can cause stock market sentiment to change. These events can lead to sudden moves up or down in price for indexes, sectors, or stocks.

There are several important events traders should watch this week.

Stock market sentiment falls on negative news

Stock market sentiment started to the downside Monday morning and held through midday before shifting to flat in early afternoon trading.

The Federal Open Market Committee (FOMC) meeting that kicks off tomorrow has the stock market as nervous as a long-tailed cat in a room full of rocking chairs. Any misstep and traders can get caught on the wrong side of how this market starts rocking.

Traders are waiting for the Federal Reserve (Fed) announcement about how much more the central bank will raise benchmark interest rates. The expectation is for the planned 75 basis points, but grumblings have grown for a possible 100 basis point increase – or a 1% jump.

The Fed final decision is expected Wednesday afternoon during a press conference.

Other events traders are watching this week include:

  • Tuesday – Canadian consumer price index release, European Central Bank president speaks;
  • Wednesday – FOMC/Fed interest rate increase announcement;
  • Thursday – Statements on British Pound and Bank of Japan;
  • Friday – Eurozone manufacturing purchasing managers index (PMI), U.S. services PMI; Fed Chairman Jerome Powell speech.

Bad economic news surfaces in stock market

As traders await the big Fed announcement, bad economic news continues to filter into the stock market environment.

The 10-year U.S. Treasury bond yield spiked to its highest level in a decade, hitting 3.51% in volatile trading on Monday. This is the highest level since 2011.

Homebuilders are inclined to lower prices as buyer demand slips, and homebuilder sentiment fell to a negative level. The National Association of Home Builders/Wells Fargo Housing Market Index showed sentiment falling to 46, and anything below 50 is not positive.

Builder sentiment is at an eight-year low, and has declined over the last nine months. In January, when mortgage interest rates were holding near 3%, the sentiment index was at 83. With interest rates pushing 6% or higher, builders aren’t confident about new buyers.

The market is also fidgety over slipping gasoline, diesel, and crude oil prices with reserves in question heading into the winter season. 
As the market digests these highlighted catalysts, traders will have to navigate the collective uncertainty that could potentially send the market racing to the downside.