US stocks are pointing to a mixed start. Cyclicals and oil stocks are in favour as treasury yields rise and oil trades at a 3 year high.
US stocks are set for a mixed open on Monday, as futures pared earlier gains and investors questioned whether global growth can survive a slowdown in Chinese growth, an energy crunch and therefore the Fed tapering support.
US treasury yields have jumped to a 3 month high before Fed speeches and expectations that the Fed will look to rein in bond purchases before the top of the year. As a result, investors are rotating into cyclicals at the expense of the high growth tech stocks, keeping the Dow Jones within the red which the tech heavy Nasdaq slumps on the prospect of tighter policy from the Fed. Industrials like Caterpillar and 3M tend to profit from an economic rebound are on the increase ,
US durables orders came in better than forecast, rebound by 1.8% MoM in August, up from -0.1% in July. The upbeat data supports the view that the US economy is recovering well and prepared for bond purchases to be tapered.
Energy stocks also are firmly in demand as oil trades at a 3 year high.
The S&P broke out of the rising channel within which it had been trading since mid-May. the worth found support on the 100 sma and pushed higher retaking the 50 sma. The RSI is neutral. However, the meteor candle suggests that reversal might be on the cards. Immediate support is being tested at 50 sma 4450. an opportunity below here could see 4400 horizontal support tested before exposing the 100 sma at 4350. Any move higher would wish to retake 4494 last week’s high to focus on 4550.
The US Dollar is trading higher despite the upbeat mood within the market. The greenback is tracing treasury yields higher after last week’s FOMC.
EUR/USD – The Euro is struggling to rise after the German elections. The SPD centre left party narrowly won the elections. However, coalition talks are starting and will continue for a few time. The prospect of lengthy coalition negotiations is weighing on demand for the Euro. A speech by ECB President Christine Lagarde is eyed later today.
Oil prices are rising for a fifth consecutive session and trading at fresh three year highs amid supply tightness and draws on inventories. US inventories are at rock bottom level for over two years.
Surging gas prices also are driving oil prices higher as oil becomes a comparably cheaper alternative for power generation.
OPEC members also are struggling to boost output due to under investment or maintenance delays from the pandemic.
Goldman Sachs has upwardly revised its oil outlook to $90 per barrel.
WTI crude trades +1.05% at $74.79
Brent trades +1.05% at $78.28