US and European futures are trading higher while traders are concerned mainly with inflation and an economic slowdown. All year, equities have been under pressure, with investors initially shifting away from overpriced tech stocks with little profitability. However, when investors became concerned about a possible recession, the sell-off expanded to other areas of the economy, including banking and retail.
A handful of significant S&P 500 equities set new 52-week lows on Thursday. Target shares have dropped to levels not seen since November 2020. Walmart stock has been at its lowest level since July 2020. Bank of America and Charles Schwab stock fell to its lowest level since February 2021. Intel’s stock has dropped to levels not seen since October 2017.
The blood bath in cryptos continues, and the BTC price has dipped below the 30K price level, and traders are very much eyeing the next support level, which is at 25K and followed by that is 22K.
In the stable coin space, Tether (USDT) revealed that it reduced its reserves allocation to commercial paper assets and boosted its allocation to US Treasury bills in the first quarter of 2022. Tether said its reserves were “completely supported” in a blog post on Thursday, ostensibly to satisfy many users’ concerns over USDT momentarily de-pegging from the dollar on May 12.
As per the company statement, its commercial paper holdings declined 17 per cent in Q1 2022, from around $24 billion to $20 billion, with a further 20% reduction in the firm’s next quarterly report. Tether raised its investments in money market funds and US Treasury bills by 13% in the same quarter, from around $34.5 billion to $39 billion.
The Euro has bounced off the lows that it hit earlier this week. Currently, the EUR/USD is trading near the 1.05 level, but traders are still of the mind frame that this is nothing more than a dead cat bounce as odds are stacked against the Euro.
This is because the dollar index is not only behaving as a safe haven asset in this riskier environment, but Fed Chairman Jerome Powell also said on Tuesday that the central bank would not hesitate to raise rates until inflation falls to a manageable level. He reiterated his commitment to bringing inflation closer to the Fed’s objective of 2%.
In contrast to the Fed and the Bank of England, the European Central Bank has failed to hike interest rates despite record-high inflation across the eurozone. It has, however, announced the end of its asset-buying programme, and officials have recently taken a more hawkish tone.
China is looking to refill its strategic crude stocks with cheap Russian oil, a hint that Beijing is boosting its energy connections with Moscow at the same time as Europe is working to block imports due to the Ukraine conflict. There are also speculations that Beijing is in talks with Moscow to purchase extra supplies. According to one source, crude would be used to replenish China’s strategic petroleum stocks, and conversations are taking place at the government level with little direct engagement from oil corporations.
On the supply side, Russia’s oil output will climb by 200,000-300,000 barrels per day in June, according to the country’s Deputy Prime Minister Alexander Novak, who spoke in Moscow yesterday. Oil Production and exports are “quite constant.” According to the Prime Minister, there are no signs that Russia’s oil industry is in trouble. He believes that Russia’s oil exports will recover very soon.
The Asian stock market traded sharply lower on the week’s last trading. The Nikkei index plunged 1.56%. The HSI index decreased by 1.05%, while the KOPSI index fell by 0.92%. The Shanghai index increased by 0.17%.
Dow Jones and S&P 500: Market Breadth
The Dow Jones’ market breadth lost further momentum. 23% of the Dow Jones stocks are trading above their 200-day moving average.
The S&P 500 stock breadth also confirmed a decline in momentum. 26% of the shares traded above their 200-day moving average.
Dow Jones Futures Today
The Dow Jones futures are trading lower today. In terms of economic data, investors will be looking at the UK’s Retail Sales data. The forecast is 1.2%, which is lower than the previous reading of 4.9%. In addition to this, we also have G7 meetings all day. The G7 members will focus on critical issues such as the conflict between Russia and Ukraine, higher oil prices, and soaring inflation.
The Dow Jones futures are trading lower, and it seems like the price is very much in free fall. The DJ 30 has pierced the lower line of the Bollinger band on the daily time frame, which suggests higher volatility and higher chances of a rebound as well. The price is trading well below the 20-day SMA on the same time frame, which indicates that bulls are not in the driving seat. The 50-day SMA continues to trade below the 100-day SMA in the same time frame, which means we could see more pain heading for the index.
As for the RSI, it indicates that the prices are oversold on the daily time frame. Currently, the RSI is trading at 31.
The near term support is at 30,568, while the resistance is 32,838.
Stock Market Rally
The S&P 500 stock index closed lower on Thursday; the index decreased by 0.58%. The tech sector led the index lower, and all the 11 sectors closed lower yesterday.
The Dow index declined on the second last trading day of the week; the Dow moved lower by 0.75%. 2 shares advanced, while 28 shares closed lower.
The NASDAQ composite, the tech-heavy index, closed lower by -0.26% yesterday.
S&P 500 Leaders and Laggards: Synopsys and under Armour
Synopsys stock contributed the most significant gain, soaring 10.25%. Under Armour stock was the most considerable drag; it fell by 15.75%. The S&P 500 stock index is down 21% so far this year.
Dow Jones Leaders and Laggards: United Health and Cisco
United health provided the biggest help for the Dow Jones; it advanced by 1.51%, while Cisco was the largest decliner, it fell by 13.73%.