Geopolitical tensions are on the rise as the US blacklists several Chinese supercomputing companies and uses the excuse of national security concerns. Of course, this reaction is going to be met with an equal response, which means China is likely to block some US companies. The concern is how far this game of blacklisting can go? Traders have certainly priced in a peaceful relationship between the US and China under Biden’s administration. The biggest damage will be if this tit-for-tat attitude starts to hurt major US corporations such as Microsoft, Apple and more. There is no doubt that China is a major growth market for these corporations and if China begins to take its big guns out and blacklists these corporation, the growth story will be all over.
The Asian stock market mainly traded lower today. The HSI index declined by 1.13%, while the ASX index dropped by 0.12%. The Shanghai index fell by 1.06%. The Nikkei increased by 0.20%
Dow Jones and S&P 500: Market Breadth
The Dow Jones’ market breadth picked up further momentum yesterday. 94% of the Dow Jones stocks traded above their 200-day moving average.
The S&P 500 stock breadth also showed strength yesterday. 95% of the shares traded above their 200-day moving average.
Dow Jones Futures Today
The Dow Jones futures are trading a bit soft today. Traders are finding it difficult to reconcile the conflicting signals in the US labour market. What we mean by this is that the monthly jobs data such as the US NFP is clearly indicating that the jobs market is much more stronger than the expectations. It states that economic recovery is on stable footing and the US economy is employing more Americans. However, if we look at the Weekly Jobless Claims number, they indicate that more Americans have started to file for more unemployment claims. We have now had two consecutive weeks of higher jobless claims and this has started to bother traders. In terms of today’s economic data, traders will be looking at the Core PPI number, which is due at 01:30 BST and the forecast is for 0.5% which is the same as the previous number.
S&P 500 Futures
The S&P 500 have seen a serious bull rally since the price touched the 50-day Simple Moving Average (SMA) on the daily time frame. There is no doubt that the S&P 500 has gone too far and too fast and this is because it is trading way away its 50-day SMA and the Relative Strength Index is also showing that the price is oversold. In terms of volume, yesterday, once again we didn’t see much participation and this means that the current price is prone to some correction. Having said that, the bulls are fully in control of the price and this is because the price is trading above the 50, 100, and 200-day SMA on the daily time frame. As long as the price continues to trade above these averages, we have nothing to worry about.
The near-term support is at 4040, while the resistance is at 4123.
Stock Market Rally
The S&P 500 stock index closed higher yesterday; the index advanced by 0.42%. The tech sector led the index higher, and 6 out of 11 sectors closed higher.
The Dow index also increased yesterday; the Dow stocks moved the index higher by 0.17%. 25 shares advanced, while 5 shares closed lower.
The NASDAQ composite, a tech-savvy index, closed sharply higher yesterday. It gained 1.03%.
S&P 500 Leaders and Laggards: ETSY and Lumen
ETSY stock contributed the biggest gain, soaring 5.573%. Lumen Technology stock was the largest drag; it fell by 4.567%. The S&P 500 stock index is up 1.74% so far this year.
Dow Jones Leaders and Laggards: Apple and Nike
Apple provided the biggest help for the Dow Jones yesterday; it advanced by 1.923%, while Nike was the largest decliner, it fell by 2.95%.