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US stocks recover sharply after weeks in the red

 

Monday, June 27, 2022

The news shaping the markets today

Russia’s President Vladimir Putin is set to make his first foreign trip after the invasion of Ukraine. Putin will visit two former Soviet states in central Asia this week. Signs of a resolution exerted some pressure on the US dollar index.


The People’s Bank of China announced the injection of 100 billion yuan into the country’s banking system, the biggest daily injection since March 31. The news lend support to the CNY/USD forex pair.


Israel’s industrial production eased to 9.9% year-over-year in April, slowing from 19.9% growth in the previous month. This being the slowest growth in industrial output since December 2021 sent the ILS/USD pair lower in forex trading this morning.


Chile’s producer price inflation slowed to a 15-month low of 19.6% in May, from 26.2% in the previous month. However, the CLP/USD forex pair traded flat after the news.


Canada’s average weekly earnings of non-farm payroll employees increased 4% year-over-year to C$1,170.1 in April. This being the eleventh straight month of growth in average weekly earnings sent the CAD/USD pair higher in forex trading this morning.

 

What’s happening: US stocks closed higher, recording sharp gains on the last trading day of the week.

What happened: US indices staged a big comeback last week and the Dow Jones index added more than 800 points.

Improving economic data supported risk-on sentiment, resulting in all three major indices snapping their losing streak after several weeks.

Why it matters: US stocks had come under significant pressure last week, taking the S&P 500 lower by 5.8%, representing the worst weekly decline since 2000. Sentiment had been impacted by fears of a recession in the US, with the Federal Reserve continuing its aggressive monetary tightening policy. The Fed raised its benchmark rate by 0.75 bps at its June meeting to ease soaring inflation in the country.

The major US indices climbed on Friday, with investors looking for strong companies with undervalued stocks. Investor sentiment was also lifted by consumer sentiment data, which is closely monitored by the US Federal Reserve.

Although the University of Michigan’s consumer sentiment dipped to a record low of 50 in June, the figure showed the 12-month consumer inflation expectations easing to 5.3%. The housing market showed easing signs too, with new home sales growing 10.7% to an annual rate of 696,000 in May.

Markets rallied on Friday, with all 11 sectors recording gains for the day. Cruise line stocks were among the best performers on the S&P 500. Carnival’s stock jumped over 12% after the company reported healthy booking volumes for the latest quarter. Shares of Royal Caribbean Cruises and Norwegian Cruise Line also spiked more than 15% each on Friday.

FedEx was also among the main gainers. Its stock rose over 7% after the company issued a strong earnings forecast.

The Dow Jones index added 823.32 points, or 2.68%, to close at 31,500.68 on Friday, with gains increasing during the final trading hour. The S&P 500 rose 3.06% to 3,911.74, while the Nasdaq 100 advanced 3.49% to 12,105.85.

The S&P 500 gaining around 6.5% for the week, while the Dow Jones index climbed about 5.4%.

What to watch: Investors await economic data on durable goods orders and pending home sales, due for release today. New orders for US manufactured durable goods had risen by 0.4% to $265.3 billion in April but are expected to decline 0.3% in May. US pending home sales are expected to decline 4.5% in May, following a 3.9% decline in April.

The markets today

Bitcoin will be in focus today after recovering some losses last week

Context: Bitcoin prices moved higher last week, surging past the key $21,000 resistance level over the weekend.

Details: Bitcoin prices had fallen below $20,000 on June 18, for the first time since December 2020. The crypto king has lost around 60% of its market cap year to date.

Sentiment was lifted by positive data on consumer sentiment from the US as well as PayPal announcing plans to support the transfer of cryptocurrencies between its platform and external wallets and exchanges.

Cryptocurrencies were also supported by an overall improvement in investor risk appetite, which also saw US and European equities rise.

After the recent downturn, bitcoin prices climbed past $21,350 over weekend. Ethereum followed suit, trading close to 1,240 during the weekend.

What to watch: Markets will keep an eye on moves by the Federal Reserve, Bank of England and the European Central Bank, with changes in monetary policy having an impact on crypto sentiment. Rising inflation and the ongoing Russia-Ukraine war will also remain in focus.

Other Markets: European trading indices closed higher on Friday, with the FTSE 100, DAX 40, CAC 40 and STOXX Europe 600 up by 2.68%, 1.59%, 3.23% and 2.62%, respectively.

Support & resistances for today

Technical Levels News Sentiment
EUR/USD – 1.0551 and 1.0563 Negative
GBP/USD – 1.2263 and 1.2284 Positive
Gold – 1836.79 and 1838.64 Positive
Natural Gas – 6.205 and 6.217 Negative
DAX 40 – 13109.74 and 13156.01 Positive

 

Market snapshot

Futures at 0400 (GMT)
EUR/USD (1.0554, -0.04%) Dow ($31,521, 0.11%) Brent ($109.18, 0.1%)
GBP/USD (1.2276, 0.02%) S&P500 ($3,926, 0.25%) WTI ($107.68, 0.1%)
USD/JPY (134.83, -0.28%) Nasdaq ($12,201, 0.50%) Gold ($1,837, 0.4%)

What else to watch today

Spain’s producer inflation, France’s initial jobless claims and unemployed persons, Mexico’s balance of trade, US Dallas Fed manufacturing index, Central Bank of Brazil’s focus market readout, ECB’s forum on central banking as well as G7 summit.


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