Opening Bell: Stock Woes Deepen As All Eyes Turn To Fed; U.S. Dollar Gains

Key Events

Global stocks and futures on the S&P 500, Dow and NASDAQ 100 deepened a slide this morning after an upbeat U.S. job report tempered the benefits of the Fed rate cut tailwind.

STOXX Daily Chart

Europe's STOXX 600 dropped for the third day after the world’s largest chemical producer, German BASF (DE:BASFN), posted a profit warning, heightening growth fears across the continent. Technically, the pan-European benchmark is testing the short-term uptrend line, while the RSI already fell below it, suggesting prices may follow.

The euro also inched lower for the third consecutive session due to the dollar's post-nonfarm payroll data strength, extending a downside breakout of the short-term uptrend line.

In the earlier Asian session, regional stocks excluding Japanese shares reached near a three-week low after investors repriced their overconfidence in falling U.S. interest rates. Hong Kong’s Hang Seng tumbled -0.76% even after the city’s Chief Executive Carrie Lam called her government's controversial extradition bill “dead.”

Global Financial Affairs

In Monday's U.S. session, equities continued to fall on the downward effect Friday's strong labor data carried on investors' rate cut outlook.

S&P 500 Daily Chart

The S&P 500 gave up 0.48%, with Materials (-1.15%) leading declines, while Real Estate (+0.34%) outperformed. Technically, the index fell below its short-term uptrend line, with the RSI possibly forming a double-top reversal.

The Dow Jones Industrial Average retreated 0.43%, the NASDAQ Composite dropped 0.78% and the Russell 2000 underperformed with a 0.93% loss.

Meanwhile, the yield on 10-year Treasurys is hovering in a holding pattern—after jumping the most since Jan. 3 on the positive NFP numbers—as investors await clues on the Fed's monetary policy path from Chairman Jerome Powell, who speaks at a banking conference today ahead of his highly anticipated testimony before Congress at 8:45 ET on Wednesday—dramatically increasing the likelihood of high volatility at the open.

DXY Daily Chart

The dollar returned to trading along its uptrend line since September, to cross above its short-term downtrend line since May—no less. Investors can expect fluctuations during and after Powell’s speech.

XAU Daily Chart

In mirror image to the USD and despite the broader risk off mood, gold is falling for the third day, once again demonstrating it is mostly an anti-dollar trade rather than a safe haven asset. Technically, the drop extended a break of the short-term uptrend line, threatening a small double top pattern.

WTI Daily Chart

Oil was seen ticking higher as geopolitical tensions on the Mideast front intensified after the U.K. seized an Iranian oil tanker—believed to be carrying over 2 million barrels of oil to Syria—off the coast of Gibraltar. Technically, the price remained under pressure below the medium-term downtrend line and the 200 DMA.

Up Ahead

• The front-runners for U.K. Prime Minister Theresa May's succession, Boris Johnson and Jeremy Hunt, will go head to head in a televised debate tonight, ahead of the final vote on July 23 .
• Federal Reserve Chairman Jerome Powell testifies before Congress on monetary policy and the state of the U.S. economy on Wednesday and Thursday.
• Fed minutes are due on Wednesday, ECB minutes on Thursday.
• The core consumer price index, a key measure of U.S. inflation coming out on Thursday, is expected to have increased 0.2% in June from the prior month, while the broader CPI is forecast to remain unchanged.
• U.S. producer prices come out on Friday.

Market Moves

Stocks

• Germany’s DAX slipped 0.8% on the largest drop in more than five weeks.
• The MSCI Emerging Market Index dropped 0.4%.

Currencies

• The Dollar Index rose more than 0.1%.
• The British pound fell 0.2%.
• The euro dropped less than 0.05% to $1.1209.
• The Australian dollar slid 0.3%.

Bonds

• The yield on 10-year Treasurys rose less than one basis point to 2.05%.
• The yield on 2-year Treasurys gained less than one basis point to 1.89%.
• Japan’s 10-year yield climbed less than one basis point to -0.141%.
• Spain’s 10-year yield increased one basis point to 0.444%.

Commodities

• Gold declined 0.1% to $1,394.35 an ounce.
• West Texas Intermediate crude fell 0.4% to $57.43 a barrel.
• Iron ore climbed 3.1% to $115.86 per metric ton.