01 March 2021

Wall Street Ends Mostly Lower, With Weekly Loss

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the markets today

     

What’s happening: US stocks closed mostly lower on Friday, although the Nasdaq 100 was able to record modest gains.

What happened: The Dow Jones index remained volatile through Friday and settled near its session lows, with investors responding to the quick rise in US Treasure yields and inflation concerns.

Despite all three major US indices recording weekly losses, Wall Street ended February with modest gains.

Why it matters: After a week of trending lower, the US equity market weakened further following the release of the personal consumption expenditures (PCE) price index. The PCE price index, which is the Federal Reserve’s preferred gauge of inflation, rose 0.3% for the month, higher than the consensus estimate of 0.2%. However, the index was up merely 1.5% on a yearly basis, which matched markets expectations.

Stock investors, especially those with tech stocks in their portfolio, have been concerned about the 10-year Treasury yield, which had climbed to above 1.6% on Thursday. The yield eased by 10 basis points to about 1.42% on Friday, following the release of inflation data. Despite closing lower, investors remained concerned about the elevated rates, which has the potential to halt the rally in equities.

Backed by optimism around a faster economic recovery, with the rollout of covid-19 vaccines and encouraging GDP estimates, the 10-year rate has gained more than 50 basis points year to date, pushing the Nasdaq 100 lower by around 5% last week.

“If the market begins to believe that the Fed has somehow lost control of where the bond market is going, all that idea of a taper tantrum will show up,” said Art Cashin of UBS.

Investors are putting their money into the stocks that are expected to benefit from the vaccine rollout. Energy stocks surged 4.3% last week, adding more than 21% in February, amid prospects of a potential recovery in the travel industry to pre-covid-19 levels. Financial shares also recorded a gain of 11% last month amid rising bond rates.

The blue-chip Dow Jones index dipped 1.5% to close at 30,932.37 on Friday, after trending up earlier in the session. The 30-stock index shed 1.8% last week, while the S&P 500 lost 2.5%, recorded losses for a second straight week. The S&P 500 declined 0.5% on Friday, with energy and financial shares recording losses. The Nasdaq 100 ended the day 0.63% higher at 12,909.44, as big tech stocks staged a slight recovery following the selloff through the week. Shares of Facebook, Amazon and Microsoft all added over 1% on Friday.

Despite the decline in shares last week, Wall Street closed February mostly higher, with the Dow Jones index and S&P 500 adding 3.2% and 2.6%, respectively, recording gains for the third month in the last four months. The tech-heavy Nasdaq 100 lost 0.1% last month.

What to watch: With the US House of Representatives clearing the massive $1.9 trillion covid-19 relief package on Saturday, markets look forward to the Senate passing the bill.

Investors also await manufacturing PMI and construction spending data from the US. The IHS Markit manufacturing PMI is expected to decline to 58.5 in February, from 59.2 in January, while the ISM manufacturing PMI is projected to improve slightly to 58.8 in February, from a reading of 58.7 in the prior month. Analysts expect construction spending to rise 0.8% in January, following a 1% increase in the previous month.

US stocks appear poised for a small recovery in today’s session, with stock futures for the major indices trading higher this morning.

The Markets Today

     

Gold will be in focus today, after recording its biggest monthly decline in more than four years.

Context: Gold prices slipped for a fourth consecutive session on Friday, as higher bond yields resulted in lower demand for the safe-haven metal.

Details: Government bond yields pared some gains on Friday after surging sharply last week. The 10-year Treasury note yield hit a 52-week high of 1.513% on Thursday, up significantly from 1.34% last Friday.

Gold futures continued their losing streak on Friday with a stronger US dollar causing a further drag on the yellow metal. The ICE US Dollar Index, measuring the greenback’s performance versus a basket of six major currencies, added around 0.8% on Friday.

Covid-19 vaccine rollouts and prospects of a quicker rebound in the economy during the second half of the year have been key drivers of investor sentiment and risk appetite. The final reading of the University of Michigan's consumer sentiment came in at 76.8 points in February, versus a preliminary estimate of 76.2.

Gold for April delivery dipped 2.6% to close at $1,728.80 an ounce on the Comex, notching the weakest settlement since June 2020. Gold prices lost around 2.7% for the week, shedding 6.6% in the month, which marked as its biggest monthly decline since November 2016.

In other metals, May silver fell 4.5% to settle at $26.44 an ounce, notching a 3% weekly loss and a 1.8% decline for February.

What to watch: Markets will keep an eye on US Treasury yields, which is likely to provide direction to gold prices in the coming period. Traders also continue to focus on recent developments around the fiscal stimulus package.

Rising covid-19 cases remain a top concern for markets, with total global infections exceeding 114 million.

Gold prices may recover today, after tumbling sharply last week. The yellow metal had added more than 1% at 5pm GMT.

Other Markets: European trading indices closed lower on Friday, with the STOXX Europe 600 Index, FTSE 100, German DAX 30 and French 40 down by 1.64%, 2.53%, 0.67% and 1.39%, respectively.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

Turkey’s GDP growth rate, manufacturing PMI, Indonesia’s value of loans, Spain’s manufacturing PMI, Italy’s manufacturing PMI, consumer prices, gross domestic product and government budget, France’s manufacturing PMI and new car registration, Germany’s manufacturing PMI, Eurozone’s manufacturing PMI, UK’s mortgage lending, consumer credit, mortgage approvals and manufacturing PMI, Mexico’s manufacturing confidence index and manufacturing PMI, South Africa’s vehicle sales, India's balance of trade, Brazil’s manufacturing PMI and balance of trade, Russia’s money supply M2 and business confidence as well as Canada’s current account and manufacturing PMI.

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