Stock Market Today
The US stock futures are trading lower as investors continue to react to Fed’s tightening monetary policy and rising covid numbers in China. All the major US stock indices are on track to close the week in negative territory as investors primarily favor risk-off assets. The most recent FOMC meeting minutes show a stronger sense of urgency than earlier communication, as the Fed has made it clear that it is very serious about winding down the balance sheet much quicker than market participants previously expected. Investors kept a close eye on the Ukraine-Russia conflict throughout this week, as Ukraine asked NATO for additional armaments and the EU and US considered an embargo on Russian coal. Congress enacted legislation yesterday to embargo Russian oil and gas imports, the latest step in the US government’s drive to economically isolate and punish the Kremlin for its unjustified invasion of Ukraine.
These geopolitical tensions are still very much in focus and are likely to drive most of the price action today. Oil prices are the ones that investors are keeping a close eye on as they are likely to remain highly volatile now. Despite the US’s embargo on Russian oil and coal, both Brent and Crude oil prices have fallen below the critical price level of $100. Traders are uncertain about a similar action by the US’s European allies as it doesn’t seem like they will embargo the Russian energy sector as it is likely to cut deep their national economic growth. Counties like Germany are heavily reliant on Russian gas, and in short to medium term, they have no other alternative but to continue buying gas from Russia.
The Russian Ruble has been an interesting currency this week as it has made a tremendous comeback this week. The Ruble plunged when Russia attacked Ukraine, and President Joe Biden made a joke of Ruble by calling it “Rubble”. Now the currency is sitting at a level where it was before the war against the dollar. The most important factor to pay attention to here is that this is despite seeing overall strength in the dollar index this week because of the ultra hawkish stance by the Fed. The Fed cannot afford the current level of inflation, nor is it comfortable with the size of its balance sheet. It announced this week that it wants to reduce its balance sheet by 95 billion dollars per month, which is a number that massively surprised Wall Street.
The Asian stock market traded mostly lower on the final trading day of the week. The Nikkei index declined 0.02%. The Shanghai index dropped by 0.06%, while the HSI index fell by 0.569%. The ASX index increased by 0.41%.
Dow Jones and S&P 500: Market Breadth
The Dow Jones’ market breadth gained a bit more momentum during the last session. 53% of the Dow Jones stocks traded above their 200-day moving average.
The S&P 500 stock breadth also confirmed strong momentum. 56% of the shares traded above their 200-day moving average.
Dow Jones Futures Today
The Dow Jones futures are trading modestly lower today. In terms of economic data, investors will be looking at the CAD employment Change and the Unemployment Rate numbers which will be hitting the tape at 13:30 PM GMT. The forecast for the CAD Employment Change is 77.5K, while the previous number was 336.6K. As for the Unemployment Rate, the forecast is for 5.4% against the previous reading of 5.5%. Later in the day, we also have the US Final Wholesale Inventories m/m data, which is expected to come in at 2.1%.
The Dow Jones futures are trading lower today while the price has failed to stay above the 100 and 200-day SMA on the daily time frame. This shows that the current bull trend doesn’t have enough strength to keep the uptrend going. Having said that, the price is still trading above the 50-day SMA on the daily time frame, which is a positive sign for the price. Overall, this week, the price action has been week as the index is set to close the week in a negative territory, and on the weekly time frame, the price has also dropped below the 50-week SMA which is another bearish sign.
As for the RSI, it is rising and moving away from its oversold region of 30. The current reading of the RSS is 46, which shows that the DJ30 price isn’t rich nor cheap. A level of 30 on the RSI is associated with the price being cheap, and a level of 70 on the RSI is considered as the price being too rich.
The near-term support is at 33,699, while the resistance is at 35,398.
Stock Market Rally
The S&P 500 stock index closed higher yesterday; the index increased by 0.43%. The health care sector led the index lower, and all 11 sectors closed high.
The Dow index also moved higher on Thursday; the Dow stocks moved the index higher by 0.25%. 17 shares advanced, while 13 shares closed lower.
The NASDAQ composite, the tech-heavy index, closed higher by 0.06%.
S&P 500 Leaders and Laggards: HP and Twitter
HPQ stock contributed the biggest gain, soaring 14.75%. Twitter systems stock was the largest drag; it fell by 5.39%. The S&P 500 stock index is down 5% so far this year.
Dow Jones Leaders and Laggards: Merck and Co and Visa
MRK provided the biggest help for the Dow Jones; it advanced by 2.1%, while Visa inc was the largest decliner, it fell by 1.306%.