US open: Stocks drop, USD rallies as Fed fallout continue
Fiona Cincotta June 18, 2021 8:49 AM
Stocks set to open sharply lower, the US Dollar in the rise as a quiet economic docket leave investors digesting the Fed's move for another session. Beware of triple witiching!
Dow futures -0.95% at 33498
S&P futures -0.8% at 4190
Nasdaq futures -0.5% at 14080
FTSE -1.4% at 7073
Dax -1.41% at 15509
Euro Stoxx -1.3% at 4104
Dow under performs again
US stocks are pointing to a sharply lower start, with the Dow underperforming its Wall Street peers for a second straight session. The Dow closed -0.6% lower in the previous session, whilst the Nasdaq closed 0.87% higher.
The reflation trade which saw investors rotate out of high growth and into value stocks looks to be unwinding. As the tech heavy Nasdaq hit a fresh record high on Thursday, the Dow broke below a key support.
The timing of this unwinding is interesting, because it comes as the Fed indicates towards tighter policy. Usually, higher interest rates are supportive of gains in cyclicals and value stocks. Perhaps the Fed has calmed the market that inflation won’t overheat?
There is no high impacting US data due today and the earnings calendar is also quiet. It is however, triple witching Friday with options and futures on indices and equities set to expire. This can lead to higher levels of volatility.
Adobe trades +3% pre-market after reporting Q2 results which easily beat forecasts. EPS came in at $3.03 on revenue of $3.84 billion.
Where next for the S&P500?
The S&P 500 extends declines from its all time high of 4267 reached earlier in the week. The price has fallen below the 50 sma on the 4 hour chart but remains supported by the 200 sma and the ascending trendline dating back to November. Strong support can be seen at 4195, the confluence of the 200 sma, the ascending trendline and the weekly low. A move below this level could see the downside gain momentum. A move above 4230 the 50 sma is required for the buyers to look again towards 4267.
FX – USD trades at 2 month high, GBP falls on weak retail sales
The US Dollar continued to drive higher on its post Fed buzz. The US Dollar Index trades at a two month high.
GBP/USD trades under pressure following worse than forecast retail sales. UK retail sales unexpectedly declined in May by -1.4% MoM, this was down from an impressive 9.2% increase in April as non-essential retail re-opened. Expectations had been for a rise of 1.6%. The weaker print is unlikely to be owing to falling consumer confidence but rather than households are spending money on eating out as indoor hospitality reopened on May 17.
GBP/USD -0.2% at 1.3895
EUR/USD +0.05% at 1.1910
Oil slips again
Oil prices are moving lower for a second straight session, although the uptrend remains intact. A stronger US Dollar after the Fed’s hawkish surprise has weighed on demand for the US Dollar denominated commodity. Fundamentally the picture remains sound for oil which is keeping losses limited. International travel is on the cusp off kicking off again as the EU adds the US to its safe travel list.
Concerns over Iranian oil flooding back into the market have lingered over recent weeks as Iran and the US hold direct talks over reviving the 2015 nuclear deal. Iran’s top negotiator said progress was being made on Friday. However, the election of a new President in Iran who is already sanctioned by the US is unlikely to help relations.
US crude trades -0.6% at $70.41
Brent trades -0.67% at $72.06
18:00 Baker Hughes rig count
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.