Asia Morning: US Stocks Drop on Powell's Warning
Ming Lam May 14, 2020 2:05 AM
On Wednesday U.S. stocks dropped for a second session as investors were discouraged by Federal Reserve Chairman Jerome Powell's downbeat comments about the economy...
On Wednesday U.S. stocks dropped for a second session as investors were discouraged by Federal Reserve Chairman Jerome Powell's downbeat comments about the economy.
Powell warned of an extended period of weak growth and stagnant incomes due to the coronavirus pandemic. And he said additional fiscal stimulus should be provided to prevent long-lasting economic damage.
Meanwhile, the Fed chief stated that the central bank would not push interest rates below zero.
The Dow Jones Industrial Average sank 516 points (-2.2%) to 23,248, the S&P 500 lost 50 points (-1.8%) to 2,820, and the Nasdaq 100 was down 112 points (-1.2%) to 9,000.
Source: GAIN Capital, TradingView
Automobiles & Components (-5.27%), Banks (-4.41%) and Energy (-4.39%) sectors lost the most.
Coty (COTY -15.5%), National Oilwell Varco (NOV -10.7%), Under Armour (UAA -9.7%), Norwegian Cruise Line (NCLH -7.0%) and Salesforce.com (CRM -4.5%) were the top losers.
On the other hand, BlackRock (BLK +6.9%), Regeneron Pharmaceuticals (REGN +3.5%), Newmont Goldcorp (NEM +2.3%) and Equinix Inc (EQIX +2.3%) posted gains.
On the technical side, about 25.8% (29.9% in the prior session) of stocks in the S&P 500 Index were trading above their 200-day moving average, and 44.4% (64.9% in the prior session) were above their 20-day moving average.
The VIX Index - Wall Street’s fear gauge - rose 2.21 points (+6.7%) to 35.25, the highest level since May 4.
U.S. official data showed that the Producer Prices Index dropped 1.3% on month in April (-0.5% expected).
Later today, Initial Jobless Claims for the week ended May 9 (2.500 million expected) and Import Price Index for April (-3.2% on month expected) will be reported.
European stocks returned to negative territory, with the Stoxx Europe 600 Index losing 1.9%. Germany's DAX sank 2.6%, France's CAC slumped 2.9%, and the U.K.'s FTSE 100 was down 1.5%.
U.S. Treasury prices remained firm, as the benchmark 10-year Treasury yield declined 4.2 basis points to 0.648%.
Spot gold price jumped 13 dollars or 0.8% to $1,715 an ounce.
Oil prices came under pressure as Powell pointed out that the economic outlook was highly uncertain. U.S. WTI crude oil futures (June) slid 1.9% to $25.29 a barrel.
On the forex front, the ICE U.S. Dollar Index gained 0.2% on day to 100.20. Federal Reserve Chairman Jerome Powell said they are not considering negative interest rates, despite a highly uncertain outlook and significant downside risks.
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.