The Fed’s Decision…. The S&P500 is on Support… The USD/JPY Continues to Lose Ground

The major stock indices presented a volatile session yesterday, as economic data and China’s new policy to restrain economic growth, weighed on investor’s sentiment. Even though stocks pushed higher at the start of the session, Financials pulled the market lower, sending the major indices into negative territory.

Investors have been cautious to enter bullish positions, avoiding catching a falling knife, due to China’s recent news statement. The second largest economy after the United States intends to raise reserve requirements to prevent an additional bubble. According to recent data, growth in China exceeded analysts’ expectations and came out at a whopping 10.7% in the 4th quarter. Even though this is a good sign for the current recovery, the additional cash that was pumped into the system through various types of stimulus, could have a negative effect on the economy in the long run. Bank officials now fear that the vast amount of stimulus could lead to inflationary problems and ruin the country’s economic rebound.

Over in the U.S, economic data had a minor positive affect at the start of the intraday session as CB consumer confidence increased to 55.90 from 53.6, while the house price index jumped by 0.7% compared to an expected 0.5%. The S&P/CS Home price indices Composite -20 (YoY) dropped more than expected at -5.3% but showed improvement compared to its prior figure of -7.3%. When observing the chart below, provided by Standard & Poors one can see that even though there has a been an improvement over the last year, the index has not yet returned to stable levels.



From a technical point of view the major indices treaded around prior levels, after presenting a volatile session. The S&P500 index finished the day on support of 1090. The drop at the end of the session does not augur well going forward today.



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