stocks stock news Archives – Financial Market News

S&P 500 Futures Hit Pause Button Amidst Inflation Data and Fed Minutes

ABC Trader / October 11, 2023

Early on Wednesday, the recent surge in U.S. stock futures came to a temporary halt as market participants focused on upcoming events, including the release of inflation data and the kickoff of the corporate earnings season. Current Activity in Stock-Index Futures: Recent Market Performance: On the previous trading day, the Dow Jones Industrial Average (DJIA) witnessed a 135-point increase, equivalent to a 0.4% gain, closing at 33739. The S&P 500 (SPX) showed a 23-point climb, reflecting a 0.52% increase, closing at 4358. The Nasdaq Composite (COMP) reported a 79-point rise, marking a 0.58% increase, closing at 13563. Driving Forces in the Market: Over the past three trading days, the S&P 500 has enjoyed a 2.35% rise, primarily driven by a significant decline in the yield on 10-year Treasurys (BX:TMUBMUSD10Y), which receded by approximately 20 basis points from the recent 16-year peak observed last Friday. This drop in long-term implied borrowing costs follows recent statements from Federal Reserve officials, hinting that the central bank might have concluded its cycle of interest rate increases. Richard Hunter, Head of Markets at Interactive Investor, remarked, “Markets continued to trend upwards as the uncertainties related to the Middle Eastern conflict were mitigated by a further moderation in the Federal Reserve’s language.” While bond yields have declined further on Wednesday, the gains in stock-index futures have been modest, with traders adopting a more cautious approach as they brace for crucial economic data releases and corporate earnings reports in the coming days. Susannah Streeter, Head of Money and Markets at Hargreaves Lansdown, noted, “The surge in optimism, driven by hopes that the Fed will take a more lenient approach with its interest rate policies, seems to have hit a plateau. Investors are showing a bit more restraint as they look forward to tomorrow’s release of U.S. inflation data.” On the economic front, the U.S. consumer price index report for September is scheduled for publication before the market opens on Thursday. Additionally, investors are eagerly awaiting the release of producer prices data for September at 8:30 a.m. Eastern, along with the minutes from the Federal Reserve’s previous policy meeting at 2 p.m. Streeter emphasized that “investors are highly sensitive to data, and if U.S. inflation shows any signs of deviating from its downward trajectory, it could unsettle the markets and challenge expectations of a more dovish stance from the Federal Reserve.” Wednesday also brings a series of speeches from Federal Reserve officials. Fed Governor Christopher Waller is expected to deliver remarks in Park City, Utah, at 10:15 a.m., Atlanta Fed President Raphael Bostic is scheduled to discuss the economic outlook at 12:15 p.m., and Boston Fed President Susan Collins will give the Goldman Lecture on Economics at Wellesley College at 4:30 p.m. Traders are also eagerly anticipating the start of the third-quarter corporate earnings season, which kicks into high gear with major banks such as JPMorgan Chase (JPM), Citigroup (C), and Wells Fargo (WFC) set to release their earnings reports on Friday.

Market News

Global Jitters: The U.S. Dollar’s Rise and Its Impact on Investments

ABC Trader / September 7, 2023

The strengthening U.S. dollar has raised concerns both internationally and among investors worldwide. However, there is uncertainty regarding the ability of authorities to curb this ascent and its potential to adversely affect U.S. equities. Edward Moya, a senior market analyst at Oanda, expressed, “The rising value of the dollar is starting to unsettle everyone. Last night, officials from Japan and China attempted to halt the dollar’s surge, but their efforts were unsuccessful.” Despite warnings from Japanese authorities about potential interventions in currency markets, the Japanese yen continued its decline against the dollar, trading at nearly 148 to the U.S. dollar, marking its lowest level in ten months. Masato Kanda, vice finance minister for international affairs, voiced concerns about the detrimental impact of significant currency fluctuations on both companies and households, stating, “We won’t rule out any option and will take appropriate action if this trend persists.” Meanwhile, China’s central bank took various steps, including setting a daily reference rate for the yuan higher than expected, in an attempt to bolster the currency as it traded near its weakest level against the dollar since November. Despite discouraging economic data from Germany, European Central Bank officials remained focused on the potential for further interest rate increases. The euro traded near a three-month low compared to the dollar. Moya offered insights on the situation, remarking, “Talk about foreign exchange is only effective when supported by compelling data and market conditions that justify decisive and meaningful action.” He also expressed concerns about China’s property crisis and the risks of contagion, noting, “China’s most pressing issues aren’t solely related to the gradual decline of the yuan.” The ICE U.S. Dollar Index, which measures the dollar’s performance against six major currencies, briefly exceeded the 105 mark for the first time since March, reaching 104.87, a 0.1% increase. The dollar’s strength can be attributed to robust U.S. economic data, which has positioned the United States more favorably compared to other developed markets. Even if the Federal Reserve has concluded or nearly concluded its interest rate hikes to combat inflation, strong economic data suggests that interest rates are likely to remain elevated. This view gained further support after Saudi Arabia and Russia extended their cuts in crude oil production, pushing Brent crude oil prices back above $90 per barrel. Rising oil prices led to an increase in Treasury yields, which enhanced the dollar’s appeal. Nevertheless, concerns about rising yields and the trajectory of Fed interest rates weighed on U.S. stocks during the week, with both the S&P 500 and the Dow Jones Industrial Average experiencing declines. For stock market investors, a strong dollar can present challenges, especially for companies heavily reliant on overseas sales, as it makes their exports more expensive for foreign buyers. However, it appears that the current movements of the dollar are not yet causing significant issues. Ross Mayfield, an investment strategy analyst at Baird Private Wealth Management, believes that the current surge in the dollar is more likely a temporary uptick within a broader downtrend rather than a sustained rally. While the dollar had experienced a significant increase in 2022, causing disruptions in financial markets, the ICE U.S. Dollar Index, although trading near a six-month high, remains nearly 5% lower than its level from a year ago and has decreased by 8.6% from its peak reached in the fall of the previous year, which was just below 115. Mayfield speculates that the dollar is likely to stabilize and eventually weaken, rather than continue its recent rally. He suggests that significant concerns would only emerge if the dollar index were to break through and reach new highs in 2023, potentially revisiting the peaks seen in late 2022.

Market News

Bulls Beware: Why the S&P 500’s Support Break Could Spell Trouble

ABC Trader / August 27, 2023

The S&P 500 Index (SPX) reached a peak near 4600 in late July, marking the start of a downtrend that persists. Recently, it faced a significant test of support around 4330, and this support held firmly. According to this measure, the bull market remains intact on the SPX chart. While there is another support level at 4200, it’s the 4330 level that is crucial for maintaining a “core” bullish stance. Despite several instances of oversold conditions, the ongoing rally could be categorized as an oversold bounce. Typically, such rallies tend to reach or slightly surpass the declining 20-day Moving Average before fading. With NVIDIA’s robust earnings reported on Wednesday, SPX is likely to surpass its declining 20-day Moving Average on Thursday. During the recent pullback, SPX dipped below its -4σ “modified Bollinger Band” (mBB), which completed the McMillan Volatility Band (MVB) sell signal from late July (indicated by a red “S” on the SPX chart). Furthermore, moving below the -4σ Band may set the stage for a potential new MVB buy signal. Although a “classic” mBB buy signal appeared recently in SPX’s activity, these signals have often produced false alarms in the past. Therefore, confirmation through follow-through, culminating in the MVB buy signal, is awaited and could materialize shortly. Equity-only put-call ratios continue to climb, maintaining their sell signals until they reverse and start descending. Interestingly, even during market rallies, significant put buying persists, contributing to the elevation of these ratios. Throughout most of August, market breadth has been weak, causing breadth oscillators to sustain sell signals. Despite reaching deeply oversold conditions, it requires at least two days of positive breadth to transition them from this state to a buy signal – a condition that hasn’t yet been met. Over the past eight trading days, New 52-week Lows on the NYSE have outpaced New Highs. While this nullified the long-standing buy signal from this indicator, it now stands neutral. A sell signal necessitates New Lows exceeding 100 issues for two consecutive days. Despite the recent surge in New Lows, it hasn’t been sufficient to trigger a sell signal. These indicators, often referred to as “market internals,” align with SPX’s decline, reflecting predominantly negative sentiment. In contrast, volatility metrics have largely remained subdued, reflecting a bullish outlook for stocks. The “spike peak” buy signal from VIX a few weeks ago still holds, alongside the persistence of the intermediate-term trend of the VIX buy signal. This latter signal would be invalidated if VIX closes above its declining 200-day Moving Average – a level it briefly touched this week. Volatility derivatives, in terms of the upward-sloping term structures of VIX futures and CBOE Volatility Indices, retain their bullish disposition. Moreover, VIX futures trade at substantial premiums compared to VIX. Hence, we’re maintaining a low-delta “core” bullish position as long as SPX remains above 4330, while making trading decisions based on other indicators. SPX has moved above its -3σ Band, triggering a “classic” modified Bollinger Band buy signal. However, for a McMillan Volatility Band (MVB) buy signal to materialize, SPX would need to reach 4459 or higher. If SPX trades at 4459 at any point, consider buying 1 SPY Oct (20th) at-the-money call and selling 1 SPY Oct (20th) call with a striking price 18 points higher. To manage the relatively higher cost of these October options, we’re using a bull spread. This signal holds unless SPX closes below its -4σ Band, which would negate the signal. The trade aims for SPX to touch the +4σ Band. New Recommendation: Archer-Daniels-Midland (ADM) A recent weighted put-call ratio sell signal has emerged for ADM. Since the stock fell below support, we’re acting on this signal. Consider buying 3 ADM Oct (20th) 82.5 puts in line with the market. ADM: 81.16 Oct (20th) 82.5 put: 3.00 bid, offered at 3.20 Follow-up action: All stops are mental closing stops unless otherwise noted. For SPY spreads, we’re following a “standard” rolling procedure: if the underlying hits the short strike in any vertical bull or bear spread, roll the entire spread. Maintain the same expiration and retain the distance between strikes unless instructed otherwise.