S&P 500 drops As Traders Focus on Fed

The S&P 500 falls during the New York session, it is traded is at 4,615.85, down by almost 1.02%, after the US Producer Price Index for November rose the most since 2010, on the footsteps of the last week’s CPI, as more pressures build up on the Federal Reserve Bank to tighten monetary conditions, faster than expected.

The market sentiment is relaxed, as the cycle of easy money is about to end. On Tuesday, the Department of Labor revealed that producer prices jumped by 9.6%, above the expected 9.2%. Core Producer Price Index rose by 7.7%, higher than the expected 7.2%.


The markets reacted negatively. Following the footsteps of S&P 500, the Nasdaq falls 1.74%, down at 15,802.13. The Dow Jones Industrial also lost 0.44%, currently at 36,494.29.

Fear index,” the CBOE Volatility Index (VIX), rises by almost 12%, currently at 22.70, as investors attempt to get out of stocks, moving towards cash or other assets, as the Fed last monetary policy meeting in 2021 is getting ready to release its decisions.

Sector-wise, the gainers are led by financials, energy, and materials, each rising 0.61%, 0.29%, and 0.02%. The biggest losers are technology, communication, and real-estate, down 2.18%, 1.39%, and 1.37%, respectively.

On Wednesday, the US economic docket will feature the Retail Sales data for November, alongside the critical Federal Reserve monetary policy decision.

The S&P 500 has managed to maintain its uptrend, as shown by the daily chart, with the 50, 100, and 200-day moving averages (DMAs) below the price action.

However, it seems to be forming a double-top around 4,700, which coincides with a negative-divergence in the Relative Strength Index (RSI), which at press time is below the 50 mid-line, at 49.