US open: Stocks consolidate at record highs, earnings in focus

US futures are easing lower after the Dow Jones & S&P 500 hit record highs on Friday. Earnings will step up a gear this week with Netflix, Johnson & Johnson, IBM & Coca-Cola due. USD slumps to 6 week lows

USA (2)

US futures

Dow futures -0.2% at 34122

S&P futures -0.3% at 4172

Nasdaq futures -0.5% at 13976

In Europe

FTSE -0.04% at 7011

Dax -0.15% at 15436

Euro Stoxx  +0.03% at 4033

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US stocks ease lower after record gains

US futures are pointing to a softer start across the board after both the Dow Jones and the S&P500 closed at fresh record highs on Friday. The Nasdaq also ended higher closing for the week just 0.3% off its February record high. Yields remain below the key 1.60% level although are ticking higher from the overnight low 1.55%

Upbeat banks earnings, strong macro data, in addition to a strong vaccine rollout and the Fed promising to keep monetary policy lose for longer all helped lift stocks to record highs.

Vaccine milestone

Over the weekend the US hit a key milestone with over 200 million first covid vaccine doses now given – half the adult population. Today marks the key deadline set by President Biden for the vaccine to be available for all American adults. The quicker the vaccine is rolled out, the faster, more secure the economic reopening.

US earnings ramp up

US earnings will ramp up a gear this week with Coca-Cola, IBM, Netflix & Johnson & Johnson all due to update the market. With stocks trading at record highs, investors will be keen to see whether the numbers support such lofty valuations.

Where next for the Dow Jones?

The Dow Jones pushed over the key 34,000 level for the first time in history last week taking out all topside resistance on its way. The next level of resistance is likely 35000. The RSI is in overbought territory so some consolidation or a pull back could be on the cards.

Should risk sentiment falter and the Dow Jones head lower, immediate support can be seen at 33750, the upper band of the ascending channel dating back to November. A move below there could see the sellers encounter support at 33400 this is the 20 EMA and also an ascending trend line dating back to pre-pandemic January and February 2020. Below there, the 50 EMA and mid point to the ascending channel 32700 comes into play. It would take a move below 32000 to negate the recent uptrend.

FX – US Dollar trades at 6 week low, GBP rallies

US Dollar is trading lower versus its major peers dropping to a 6 week low even as US treasury yields pick up off overnight lows and move higher. Still at 1.58% yields are still a long way from the 1.75% highs hit earlier this month.

Recent US data pointed to inflationary pressures building, both US CPI and retail sales beat forecast. However the Fed reiterated across last week that they believe any rise in inflation will be temporary.

GBP/USD is the top performing pair at the time of writing, boosted by re-opening optimism. However, other majors such as AUD/USD & EUR/USD are also capitalising on the weaker greenback

GBP/USD  +0.5% at 1.3909

EUR/USD +0.4% at 1.2033

Oil pauses as covid concerns return

After rallying over 6% across the previous week, oil prices are easing back on Monday. Concerns over rising covid cases and tighter lockdown restrictions particularly in developing countries such as India and parts of South America are dragging on demand for the back stuff and keeping any gains in check.

Oil surged across the previous week, lifted by falling inventory data and both OPEC & the EIA raising the demand outlook as countries such as the US and the UK race ahead with their vaccine programmes

US crude trades -0.14% at $63.13

Brent trades -0.28% at $66.30

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Looking ahead

16:30 3 & 6 Month bill auction

02:30 PBOC interest rate decision

02:30 RBA meeting minutes

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