US open: Stocks drop as treasury yields rise, Powell in focus
Fiona Cincotta September 28, 2021 9:39 AM
US futures trade sharply lower as treasury yields rise to a 3 month high. The tech heavy Nasdaq is set to under perform. Concerns over China are adding into the hit on stocks. Energy stocks are a rare bright spot as oil prices extend gains.
Dow futures -0.4% at 34700
S&P futures -0.9% at 4403
Nasdaq futures -1.6% at 14959
FTSE -0.13% at 7050
Dax -1.4% at 15365
Euro Stoxx -1.6% at 4094
Rotation out of tech.
US stocks are seeing opening lower on Tuesday with tech stocks taking the hardest hit ahead Fed Powell’s testimony before Congress later today.
US treasury yields have surged to fresh 3 month highs, over 1.5% following last week’s FOMC when the Fed teed-up from tapering bond purchases towards the end of the year. Powell is expected to warn that the rise in inflation could be more prolonged than initially expected, owing to supply chain bottlenecks, sparking bets of a sooner move by the Fed to raise interest rates.
As the markets prepare for a move by the Fed, a rotation out of high growth tech stocks is driving the Nasdaq sharply lower. The Nasdaq is significantly underperforming the Dow which is more closely tied to cyclicals and stocks which perform well as the economy recovers and interest rates rise.
Meanwhile concerns over a growth slowdown in China and a debt crisis in the Chinese property market are hitting risk sentiment.
Energy stocks are likely to be a bright spot once again putting in a solid performance tracing oil prices higher.
Where next for the Nasdaq?
The Nasdaq broke out of the rising wedge pattern last week falling to a low of 14818 before rebounding towards resistance at 15350. Today’s move lower has seen the price fall back below its 50 sma. The RSI supports further downside towards 14818 whilst a break below here would exposae the 100 sma at 14681. Ant recovery would need to retake the 500 sma at 15200 also a key horizontal level.
FX – USD extends gains, GBP tanks as outlook darkens
The US Dollar is rising tracing treasury yields higher as investors reposition for the Fed to taper bond purchases. Furthermore, safe have flows are also boosting the greenback amid the ongoing energy crisis and power cuts in China.
GBP/USD – The Pound is being pummeled today as risks to the UK economy keep mounting. Rising inflation expectations, supply bottleneck, labour shortages have weighed on output whilst the run of petrol at the pumps and loss of wind to generate energy are combing to create a tough picture for the UK economy.
GBP/USD -0.7% at 1.3613
EUR/USD -0.04% at 1.1692
Oil extends gains for 6th session
Oil prices are rising for a sixth consecutive session and trading at fresh three year highs amid supply tightness and draws on inventories. US producers have struggled to get back online after hurricanes caused damage earlier in the month.
Meanwhile Angola and Nigeria along with other OPEC countries are struggling to ramp up production to meet OPEC’s quota due to under investment and maintenance problems.
Tight supply is being met with rising demand as economies reopen, taking inventory cover to the lowest level in years.
API inventory data due later will be watched closely.
WTI crude trades +0.9% at $75.95
Brent trades +1.05% at $79.25
14:00 US Housing Price Index
15:00 US Consumer Confidence
15:00 Fed Powell testifies
21:30 API Weekly Crude Oil Stocks
How to trade with FOREX.com
Follow these easy steps to start trading with FOREX.com today:
- Open a Forex.com account, or log-in if you’re already a customer.
- Search for the market you want to trade in our award-winning platform.
- Choose your position and size, and your stop and limit levels.
- Place the trade.
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.