- S&P 500, NASDAQ 100 hit new records
- JNJ vaccine paused due to side effects
- Dollar falls as yields may top out
Key Events
Futures on the Dow, S&P, NASDAQ and Russell 2000 as well as European stocks edged higher in trading on Wednesday, and global gauges scored fresh records, ahead of the next major market catalyst, earnings season.
The dollar remains under pressure and fell for the third consecutive day, while Bitcoin continued rising.
Global Financial Affairs
In Europe, the STOXX 600 Index managed to advance toward Friday’s record after shares in luxury-goods group, LVMH (PA:LVMH) surged 2.6% to an all-time high on better than expected performance and a stronger revenue forecast, overshadowing a selloff in Barclays (LON:BARC) andTesco PLC (LON:TSCO) shares.
The British multinational grocery retailer’s year-on-year sales were chipped away by increased costs. From a technical perspective, the stock is facing long-time pressures that are catching up with it.
The price is developing a H&S pattern after finding resistance by the downtrend line since the 2007 all-time high.
Most Asian benchmarks followed the move higher on Tuesday in US stocks. Japan’s Nikkei 225 dropped 0.4%, bucking the trend, on concerns of rising cases of coronavirus just 100 days ahead of the postponed 2020 Olympics, which Tokyo is hosting in July.
MSCI’s broadest index of Asia-Pacific shares outside Japan climbed 0.6%, while the MSCI benchmark of equity performance in 49 countries rallied 0.15%, carving out another new record.
Yesterday during the Wall Street session, the S&P 500 and the NASDAQ 100 hit new records, despite Federal officials recommending pausing Johnson & Johnson (NYSE:JNJ) vaccination program, as it emerged that 6 women suffered serious side effects—including one death—due to rare blood clots. The Dow Jones Industrial Average, which includes JNJ, fell more than 2% and was the only gauge in the red, with 17 of 30 stocks closing in negative territory.
Goldman Sachs (NYSE:GS)—which reports earnings today before the US market opens—underperformed, plunging more than 4%, after falling yields reduced expectations for rising rates, banks’ bread-and-butter.
US Consumer Prices—a measure for inflation —climbed more than expected in March, but the move was not deemed sufficient to move a staunchly dovish Federal Reserve to reverse policy.
Investors are still unsure about the direction of yields, including for the 10-year note, which have been moving sideways for a month.
Yields have been ranging, but a fall below 1.6% would complete a top. Alternatively, topping the 1.8% would likely trigger a resumption of the bond selloff, sending yields toward the 2% highs not seen since mid-2019.
The dollar fell for a third straight day, its longest losing streak since Mar. 11, taking us by surprise.
At this point, we believe that a rising wedge has been completed. That's bearish after the preceding plunge since March. The wedge’s target is its base, which would retest a preceding, much larger falling wedge since the March peak. Now, we expect the dollar could be falling toward 90, which could be triggered by the aforementioned top in yields.
Declining yields and a falling dollar could boost gold.
This would return the yellow metal towards the top of its falling channel since the March peak, which would happen if the previous bearish flag blows out and the price tops the $1,770 level, an important support-resistance level.
Bitcoin posted a new all-time high of $64,374, ahead of today's direct listing of crypto exchange Coinbase (NASDAQ:COIN). The cryptocurrency is inching toward the $65,000 level. However, keep an eye on its trajectory, as it might be forming a bearish wedge.
The Coinbase offering will likely create a buzz, attracting new investors to the stock and the digital currency and incentivizing other crypto-related endeavors to go public while also boosting additional digital tokens.
Oil opened higher, overtaking the $61 level.
However, it remained within a potentially bearish range, the right shoulder of a possible H&S top.
Up Ahead
- Banks and financial firms begin reporting first-quarter earnings, including JPMorgan Chase (NYSE:JPM) and Goldman Sachs (NYSE:GS) report today, Citigroup (NYSE:C) and Bank of America (NYSE:BAC) on Thursday and Morgan Stanley (NYSE:MS) on Friday.
- Federal Reserve Chair, Jerome Powell is attending the Economic Club of Washington for a moderated Q&A on Wednesday.
- On Thursday, US data including initial jobless claims, industrial production and retail sales are released.
- China publishes economic growth, industrial production and retail sales figures on Friday.
Market Moves
Stocks
- Futures on the S&P 500 Index increased 0.1%.
- The FTSE 100 index increased 0.26%.
- The Stoxx Europe 600 Index climbed 0.1%.
- The MSCI Asia Pacific Index increased 0.7%.
- The MSCI Emerging Markets Index increased 0.9%.
Currencies
- The Dollar Index dipped 0.1%.
- The British pound gained 0.4% to $1.3799.
- The euro gained 0.1% to $1.1965.
- The onshore yuan strengthened 0.1% to 6.536 per dollar.
- The Japanese yenn strengthened 0.1% to 108.97 per dollar.
Bonds
- The yield on 10-year Treasuries jumped two basis points to 1.63%.
- The yield on two-year Treasuries increased less than one basis point to 0.16%.
- Britain’s 10-year yield declined one basis point to 0.774%.
- Germany’s 10-year yield decreased less than one basis point to -0.30%.
- Japan’s 10-year yield decreased two basis points to 0.091%.
Commodities
- West Texas Intermediate crude increased 1.3% to $60.96 a barrel.
- Brent crude increased 1.2% to $64.43 a barrel.
- Gold was little changed at $1,745.12 an ounce.