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Home ANALYSIS

US stocks are rebounding | Forexlive

A.R Chowdhury by A.R Chowdhury
March 16, 2022
Reading Time: 6 mins read
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US stocks are rebounding | Forexlive

The major US stock indices are moving back to the upside with the NASDAQ index back near up 2.0%. The Dow and S&P are also well off session lows.

Are markets applauding the more hawkish of Fed?

The reactions are just that reactions. There is a full story ahead which also includes Russia/Ukraine and its impact on economic growth/employment/consumer confidence/ inflation 
Inflation

Inflation is defined as a quantitative measure of the rate in which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general level of prices where a given currency effectively buys less than it did in prior periods.In terms of assessing the strength or currencies, and by extension foreign exchange, inflation or measures of it are extremely influential. Inflation stems from the overall creation of money. This money is measured by the level of the total money supply of a specific currency, for example the US dollar, which is constantly increasing. However, an increase in the money supply does not necessarily mean that there is inflation. What leads to inflation is a faster increase in the money supply in relation to the wealth produced (measured with GDP). As such, this generates pressure of demand on a supply that does not increase at the same rate. The consumer price index then increases, generating inflation.How Does Inflation Affect Forex?The level of inflation has a direct impact on the exchange rate between two currencies on several levels.This includes purchasing power parity, which attempts to compare different purchasing powers of each country according to the general price level. In doing so, this makes it possible to determine the country with the most expensive cost of living.The currency with the higher inflation rate consequently loses value and depreciates, while the currency with the lower inflation rate appreciates on the forex market.Interest rates are also impacted. Inflation rates that are too high push interest rates up, which has the effect of depreciating the currency on foreign exchange. Conversely, inflation that is too low (or deflation) pushes interest rates down, which has the effect of appreciating the currency on the forex market.

Inflation is defined as a quantitative measure of the rate in which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general level of prices where a given currency effectively buys less than it did in prior periods.In terms of assessing the strength or currencies, and by extension foreign exchange, inflation or measures of it are extremely influential. Inflation stems from the overall creation of money. This money is measured by the level of the total money supply of a specific currency, for example the US dollar, which is constantly increasing. However, an increase in the money supply does not necessarily mean that there is inflation. What leads to inflation is a faster increase in the money supply in relation to the wealth produced (measured with GDP). As such, this generates pressure of demand on a supply that does not increase at the same rate. The consumer price index then increases, generating inflation.How Does Inflation Affect Forex?The level of inflation has a direct impact on the exchange rate between two currencies on several levels.This includes purchasing power parity, which attempts to compare different purchasing powers of each country according to the general price level. In doing so, this makes it possible to determine the country with the most expensive cost of living.The currency with the higher inflation rate consequently loses value and depreciates, while the currency with the lower inflation rate appreciates on the forex market.Interest rates are also impacted. Inflation rates that are too high push interest rates up, which has the effect of depreciating the currency on foreign exchange. Conversely, inflation that is too low (or deflation) pushes interest rates down, which has the effect of appreciating the currency on the forex market.
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. However, seven hikes in $2022 put the Fed and many “market analysts” on par with each other. The Fed will also look to shrink the balance sheet and all of which can impact sentiment and expectations.

A snapshot of the market currently shows:

  • Dow industrial average up 97 points or 0.29% at 33641
  • S&P up 32.6 points or 0.77% at 4294
  •  NASDAQ 
    NASDAQ

    The Nasdaq Stock Market or NASDAQ is an American stock exchange. It trails only the New York Stock Exchange (NYSE) in market capitalization and is part of a network of stock markets and options exchanges.Launched back in 1971, NASDAQ is the acronym for the National Association of Securities Dealers Automated Quotations. Since then it is known simply as NASDAQ and has become one of the most influential exchanges worldwide.The NASDAQ was the world’s first electronic stock market, and has since assumed the majority of major trades that had been executed by the over-the-counter (OTC) system of trading.What Makes Up the NASDAQ?In particular, the exchange also features the NASDAQ Composite, which includes almost all stocks listed on the NASDAQ stock market. Along with the Dow Jones Industrial Average (DIJA) and S&P 500 Index, this is one of the three most-followed stock market indices in the United States.Overall, the NASDAQ stock market has three different market tiers. This includes the Capital Market, or an equity market for companies that have relatively small levels of market capitalization. The listing requirements for small cap companies are less stringent than for other Nasdaq markets that list larger companies with significantly higher market capitalization.Additionally, the Global Market is made up of stocks that represent the Nasdaq Global Market. The Global Market consists of 1,450 stocks that meet the exchange’s financial and liquidity requirements, and corporate governance standards.Finally, the Global Select Market is a market capitalization-weighted index made up of 1,200 US-based and international stocks that represent the Global Select Market Composite.

    The Nasdaq Stock Market or NASDAQ is an American stock exchange. It trails only the New York Stock Exchange (NYSE) in market capitalization and is part of a network of stock markets and options exchanges.Launched back in 1971, NASDAQ is the acronym for the National Association of Securities Dealers Automated Quotations. Since then it is known simply as NASDAQ and has become one of the most influential exchanges worldwide.The NASDAQ was the world’s first electronic stock market, and has since assumed the majority of major trades that had been executed by the over-the-counter (OTC) system of trading.What Makes Up the NASDAQ?In particular, the exchange also features the NASDAQ Composite, which includes almost all stocks listed on the NASDAQ stock market. Along with the Dow Jones Industrial Average (DIJA) and S&P 500 Index, this is one of the three most-followed stock market indices in the United States.Overall, the NASDAQ stock market has three different market tiers. This includes the Capital Market, or an equity market for companies that have relatively small levels of market capitalization. The listing requirements for small cap companies are less stringent than for other Nasdaq markets that list larger companies with significantly higher market capitalization.Additionally, the Global Market is made up of stocks that represent the Nasdaq Global Market. The Global Market consists of 1,450 stocks that meet the exchange’s financial and liquidity requirements, and corporate governance standards.Finally, the Global Select Market is a market capitalization-weighted index made up of 1,200 US-based and international stocks that represent the Global Select Market Composite.
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    index up 231 points or 1.79% at 13182
  • Russell 2000 up 32.31 points or 1.64% at 2001.28

Looking at the NASDAQ index, the price move back below its 100 hour moving average at 13244.00. A move back above that level would be more positive technically. Stay below is more bearish.

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A.R Chowdhury

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