Stock Market Breadth
US and European futures are trading lower as traders are still digesting the US CPI reading. Over the last year, the US consumer prices rose faster than projected, indicating a worsened picture for inflation and confirming the probability of significant interest rate rises this year.
The US CPI (consumer price index) for January, which gauges the prices of dozens of ordinary consumer products, increased 7.5 per cent year on year, against the forecast of 7.2% on Thursday. The reading was the highest since February 1982.
After adjusting for volatile gas and grocery costs, the CPI grew by 6%, compared to a 5.9% increase predicted. Core inflation has risen at the quickest rate since August 1982.
According to CME statistics, the probability of a 0.5 percentage point Fed rate rise in March increased to 44.3 per cent after the data was released, up from 25 per cent shortly before. The likelihood of a sixth-quarter-percentage-point increase this year has risen to around 63 percent, up from around 53 per cent prior to the announcement.
Russia has begun a 10-day military drill with its neighbour Belarus as tensions continue to climb over a huge build-up of military along its border with Ukraine.
According to NATO, over 30,000 Russian soldiers are likely to be in Belarus for the drills, which have been the largest Russian deployment there since the Cold War.
The rehearsals, which Russia claims are largely intended at rehearsing tactics to counter “foreign attack,” are commonly seen as a show of Russian power. The exercises are taking place at a time when 100,000 Russian troops remain stationed near Russia’s border with Ukraine.
Oil prices rose yesterday after US government data revealed that crude stocks fell unexpectedly last week to their lowest level since October 2018, while gasoline demand reached a new high.
Following the release of the inventory data yesterday, oil prices recovered from a drop caused by the beginning of indirect US-Iran nuclear discussions a day earlier. An agreement may relieve US sanctions on Iranian oil, easing global supply constraints.
Crude benchmarks touched seven-year highs earlier this week due to geopolitical fears, while a healthy demand recovery from the coronavirus epidemic has maintained stockpiles at global fuel hubs at multi-year lows.
The Asian stock market traded mostly lower on the final trading of the week. The Nikkei index increased 0.42%. The Shanghai index decreased by 0.18%, while the HSI index fell by 0.60%. The ASX index plunged 0.98%.
Dow Jones and S&P 500: Market Breadth
The Dow Jones’ market breadth lost more momentum during the last session. 58% of the Dow Jones stocks traded above their 200-day moving average.
The S&P 500 stock breadth also confirmed weak momentum. 53% 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 US Prelim UoM Consumer Sentiment and US Prelim UoM Inflation expectations numbers and both of them will hit the tape at 15:00 GMT today. The forecast for the Consumer Sentiment is 67.2, which is the same as the last reading and for the inflation expectations the previous number was 4.9%.
In terms of technical analysis, the Dow Jones futures are trading lower and it appears that the price is struggling keep its upward momentum. On the daily time frame, the Dow Jones has once again failed to stay above the 200-day SMA on the daily time frame which is a sign of weakness for the price action. The Dow was already trading below the 50 and 100-day SMAs on the daily time frames. If the price fails to break above these moving averages, it is highly likely that the price may revisit its recent lows once again.
As for the RSI, it continues to form higher lows and higher highs and it has significantly moved away from its oversold zone. Currently, the RSI is trading at 45.
The near-term support for the Dow is at 34637, while the resistance is at 35,737.
Stock Market Rally
The S&P 500 stock index closed lower yesterday; the index fell by 1.81%. The consumer discretionary sector led the index lower, and 7 sectors advanced while 3 sectors closed lower.
The Dow index also moved lower on Thursday; the Dow stocks moved the index lower by 1.47%. 17 shares advanced, while 13 shares closed lower.
The NASDAQ composite, the tech-heavy index, declined by 2.10%.
S&P 500 Leaders and Laggards: Disney and Lumen
Disney stock contributed the biggest gain, soaring 3.34%. Lumen stock was the largest drag; it fell by 15.5%. The S&P 500 stock index is down 4% so far this year.
Dow Jones Leaders and Laggards: Disney and Amgen
Disney provided the biggest help for the Dow Jones; it advanced by 3.34%, while Amgen was the largest decliner, it fell by 3.52%.