2023/01/10 (145.008) Technical Analysis

“Price Stability Is The Bedrock Of A Healthy Economy, …“, Said Powell,
So That DXY Bounces Of 7-Month Low While US10Y Back Above 3.6% Today

Wall Street Closed Nearly At Trading Sessions High Today, On Tuesday
– Boeing, CureVac, Sotera Health, Bed Bath & Beyond Were In Focus Ahead Of CPI Data On Thursday
After a bumpy start, the US stock exchanges were still clearly up on Tuesday and thus closed at the daily high. According to traders, there was initially a lack of impetus for larger swings or clear trends, but towards the end of trading investors grabbed their hands again and ensured a positive finish. The leading index, the Dow Jones, closed up 0.6 percent at 33,704. The broader S&P 500 rose 0.6 percent to 3,919, while the tech-heavy Nasdaq 100 gained 0.9 percent to 11,205.
In the Dow Jones, Boeing was the biggest loser. The data on deliveries and new orders were not well received by investors. Caterpillar, on the other hand, rose to a record high. The strongest stock in the S&P 500 was Warner Bros. Discovery, up 8.2 percent. It benefited from two positive analyst comments: Brett Feldman and Jessica Reif Ehrlich each issued a buy recommendation for the stock with price targets of $19 and $21, respectively. Smaller stocks tended to cause a stir. Sotera Health doubled after the provider of sterilization solutions and laboratory tests dropped its lawsuit against competitor Sterigenics in an Illinois court. In return, Sotera Health will receive $408 million. Pharmaceutical retailer CVS Health is considering a takeover of Oak Street Health, a primary care center operator, according to a report by Bloomberg news agency. Its shares shot up 27 percent, while CVS Health’s fell slightly. Trading in the shares of the vaccine manufacturer Curevac ended strongly again. Richard Branson’s Virgin Orbit, on the other hand, fell 14 percent to a record low. The company has failed in an attempt to launch Britain’s first satellite into orbit from its own soil. Illumina fell 5.6 percent after the genetics specialist announced that earnings this fiscal year will be significantly lower than analysts had expected. Bed Bath & Beyond’s stock rose 28 percent after quarterly figures. The home decorator wants to lay off more staff to get the curve. In the next few weeks, however, there could be a risk of going to the bankruptcy judge.
US Inflation Expectations Hit New 2021 Low But US Small Business Optimism At 6-Month Low
What Only Just Confirms What I’ve Been Writing All Through 2022 Yet, Namely That A Negative Nominal Real Yield Is Widening The WallStreet & MainStreet Gap
US consumer inflation expectations for the year ahead declined for a second month to 5% in December, the lowest level since July of 2021 and compared to 5.2%in November. Expectations declined by 0.7 percentage points for gas (to 4.1%) and food (to 7.6%), and 0.2 percentage points for college education (to 9.2%) and rent (to 9.6%). The median expected change in the cost of medical care, on the other hand, rose by 0.1 percentage points (to 9.7%). Also, home price growth expectations increased by 0.3 percentage points to 1.3%. Meanwhile, the medium-term inflation expectations remained at 3% percent, while the five-year-ahead measure increased to 2.4% from 2.3%. Furthermore, household spending expectations fell sharply to 5.9% from 6.9%, while income growth expectations rose to a new series high of 4.6%. The NFIB Small Business Optimism Index in the United States declined to a six-month low of 89.8 in December of 2022, marking the 12th straight month below the 49-year average of 98 as sales and business conditions are expected to deteriorate. Expectations for better business conditions over the next six months worsened by 8 points to -51%. Also, the net percent of owners who expect real sales to be higher worsened by 2 points to -10%. On the positive side, 41% of owners reported job openings that were hard to fill, down 3 points but historically very high. Inflation remains the single most important business problem with 32% of owners reporting it as their top problem in operating their business. Meanwhile, the net percent of owners raising average selling prices decreased by 8 points to a net 43%, but still remained historically high.
However, The DXY Bounces Off Seven-Month Low, While US 10-Year Treasury Yield Bounces Back Above 3.6% Today
The US 10-year Treasury note yield, seen as a proxy for global borrowing costs, moved back toward the 3.6% mark, as hawkish remarks from Fed policymakers once again dashed for an imminent policy pivot. San Francisco Fed president Mary Daly noted that she expects interest rates to rise beyond 5% in 2023. Her Atlanta counterpart Raphael Bostic echoed a similar view by saying that policymakers should hike above 5% by early in the second quarter and hold rates there for a long time. However, investors are not blindly buying this tightening narrative, with speculation about a recession prompting bets that the Federal Reserve will eventually cut rates later this year. Data from the Institute for Supply Management showed a contraction in US manufacturing and services activity (Dec`22).
The dollar strengthened against a basket of major currencies on Tuesday, recovering from a seven-month low of 102.9 in the prior session to around the 103.5 mark, as hawkish remarks from Fed policymakers sparked a fresh wave of buying for the greenback. San Francisco Fed president Mary Daly noted that she expects interest rates to rise beyond 5% in 2023. Her Atlanta counterpart Raphael Bostic echoed a similar view by saying that policymakers should hike above 5% by early in the second quarter and hold rates there for a long time. This dollar’s strength was seen across the board, with some of the most pronounced buying activity against the Australian dollar. The dollar has been under pressure since November as signs that inflation is cooling and speculation of a US recession tempered some expectations that the Fed will continue to hike rates aggressively.
Wall Street Ends Volatile Session Higher After Powell Says Unpopular Decisions Are Necessairy To Bring Down Prices Ahead Of Todays Trading Session
The Dow added almost 200 points on Tuesday, while the S&P 500 and Nasdaq 100 rallied 0.7% and 0.9%, respectively, as investors reassessed the outlook for economic growth and monetary policy. Risk appetite continued to be lifted by hopes that China’s reopening would boost growth prospects for the country and other economies despite some concerns that it could also trigger another wave of COVID-19 infections. On the policy front, Federal Reserve Governor Michelle Bowman was among the latest officials to warn that rates will have to rise further to bring down inflation to its 2% target. Meanwhile, in a speech delivered to Sweden’s Riksbank, Chair Powell emphasized the need for the central bank to be free of political influence while noting that climate change should not be a priority for monetary policymakers. “Price stability is the bedrock of a healthy economy and provides the public with immeasurable benefits over time. But restoring price stability when inflation is high can require measures that are not popular in the short term as we raise interest rates to slow the economy,” the chairman said in prepared remarks for the panel discussion in Stockholm. Powell’s comments focused on central banks’ independence and were short of details on the coming interest-rate decisions. The Fed raised the fed funds rate by 50bps to 4.25%-4.5% during its last monetary policy meeting of 2022, pushing borrowing costs to the highest level since 2007. Fed Officials have signaled their intention to lift the rate above 5% in 2023 and keep it there throughout the year.