US open: Powell & Yellen take the hot seat, oil slides

US points to a mixed open head of Fed Chair Powell & US treasury secretary Janet Yellen testifying before Congress. Yields ease, tech gains. Oil slides on demand concerns as covid cases in Europe rise.

USA (1)

US futures

Dow    futures -0.3% at 32681

S&P futures -0.2% at 3933

Nasdaq futures +0.24% at 13119

In Europe

FTSE -0.3% at 6706

Dax +0.16% at 14670

Euro Stoxx -0.01% at 3836

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Powell & Yellen to testify before Congress

Federal Reserve Chair Jerome Powell & US treasury secretary Janet Yellen make their first joint appearance before Congress.

The pair begin a two-day session where they are expected to discuss the state of the US economy and the economic policy response to the covid pandemic. The hearing comes two weeks after President Biden’s $1.9 trillion stimulus package was approved and as the Democrats consider a further $3 trillion stimulus plan.

In light of the stimulus package and given the recent turmoil in the bond market, which sent US treasury yields sharply higher, questions over the outlook of inflation are almost certain.

From the prepared statement Fed Powell is expected to stick to the supportive hymn sheet re-affirming that the central bank stands ready to keep policy loose until the labour market returns to its pre-pandemic state.

Stocks point to a mixed open

Risk off trade dominated the European session and is transferring across to the US. Rising covid cases and tighter lockdown restrictions hit risk appetite in Europe, as did souring relations with China.

The Nasdaq is looking to outperform, with treasury yields easing back growth stocks are back in favour.

Riskier assets such as stocks are out of favour whilst demand for the safe haven US Dollar has picked up.

Where next for the Dow Jones? 

The Dow trades above its 50 & 100 sma on the daily chart, a bullish trend. It broke out of the top side of its 4 month ascending channel, hitting an all time high of 33231 last week. However, the shooting star pattern indicated a bearish reversal. 

The price has since lost ground and is testing the resistance turned support upper band of the ascending channel at 32700. A move below this level could see the sellers look towards 13200 round number a resistance mid March before attacking the 50 sma at 31500. A move below here could negate the near-term bullish trend. It would take a move below 31000 the lower band of the ascending channel for sellers to gain momentum. 

On the flip side, should support at 32700 hold bulls could look to the all time high beyond 33000 again. 

Stocks in focus

AstraZeneca ADR -2.4% pre- market after a US health agency raised questions over the covid vaccine results saying AstraZeneca used outdated data. This could delay the US rollout of the vaccine or halt it altogether.

Boeing -0.9% pre-market after announcing that it had entered into a $5.28 billion two year revolving credit agreement suggesting that it doesn’t see a rapid recovery in demand from the pandemic

GameStop – trades flat pre-market but could see some volatility ahead of earnings later. There are questions over how much fundamentals really matter for this stocks which has been central to the populist short squeeze movement of day traders versus hedge funds.

FX – GBP breaks below 1.38 after mixed jobs data

The US Dollar is advancing on safe haven flows in a broadly risk off session.

GBP/USD – dropped through $1.38 on a combination of US Dollar strength and Pound weakness following a mixed jobs report. The UK unemployment rate unexpectedly slipped lower to 5% in the three months to January, down from 5.1%. However, the claimant count in February surged to 86.6K, versus 9k expected as more people signed up for unemployment benefits.

Investors await Fed Chair Powell’s testimony before congress together with US treasury secretary Janet Yellen.

GBP/USD -0.6% at 1.3782

EUR/USD trades -0.5% at 1.1927

Oil turns after weaker start

Crude has slide through $60.00 as it struggles to find its mojo following last weeks’ decline. Rising covid cases in Europe and tighter lockdown restrictions are reviving future demand concerns. Summer holiday’s abroad this year are looking increasingly unlikely which will mean demand could take even longer to recover.

Whilst countries are set to reopen economies in the coming months, any rise in demand from here is likely to be matched by increased supply as OPEC+ is set to ease production cuts in the coming months and as US shale output picks up.

US crude trades -3.8% at $59.16

Brent trades -3.7% at $62.04

Learn more about trading oil here.

The complete guide to trading oil markets

Analyst Fiona Cincotta looks at the price action of oil and levels to watch here

Looking ahead

14:00 New home sales

16:00 Fed Powell testifies

20:30 API weekly crude oil stock

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