Stocks React to Powell's Remarks: Market Dips and Bond Yields Rise

On Monday night, U.S. stock futures showed little movement following a market dip influenced by increasing bond yields and concerns about the Federal Reserve's potential reluctance to cut interest rates as much as anticipated. The dip in U.S. stocks during the previous trading session was attributed to losses in sectors like Basic Materials, Utilities, and Consumer Goods.

Wall Street's primary indexes closed lower on Monday, with the Dow experiencing downward pressure due to consumer stock fluctuations, particularly a decline in McDonald's shares and an increase in Treasury yields following Federal Reserve Chair Jerome Powell's comments resisting expectations of imminent rate cuts. During the main trading session, the S&P 500 retreated from its previous week's record high, and the NASDAQ Composite slipped.

Powell's statements on "60 Minutes" on Sunday night indicated that a rate cut in the Fed's March meeting is unlikely, reducing the probability of a March rate cut to 16%, down from an earlier peak of 80%. This led to a 13-point increase in the U.S. 10-Year Treasury yield on Monday, reaching 4.16%.

Additional factors contributing to doubts about rate cuts included fresh data from the Institute for Supply Management, showing growth in the U.S. services sector in January, along with rising input prices. This, combined with Friday's data indicating the resilience of the labor market, further diminished expectations of rate cuts.

Consumer stocks faced pressure from various fronts, including McDonald's reporting lower-than-expected comparable sales growth due to international boycotts related to Middle East violence. Tesla and cruise stocks, including Carnival Corporation, also experienced a selloff, adding to the challenges in the consumer sector.

On a positive note, Nvidia reached a record high after Goldman Sachs increased its price target, citing optimism in generative artificial intelligence spending. Caterpillar saw a rise in its shares due to better-than-expected fourth-quarter adjusted per-share profit.

Boeing, however, faced a more than 1% decline after warning of potential delivery delays due to a new issue in some fuselages of its 737 jets. Safety concerns have been rising since a recent incident involving a 737 Max 9 plane.

A Federal Reserve survey indicated that U.S. banks expect increased loan demand as interest rates fall, despite tightening credit standards on certain loans. The survey revealed concerns about collateral values and a less favorable economic outlook affecting standards on commercial real estate, credit cards, and auto loans.

The U.S. dollar strengthened against major currencies as traders adjusted expectations for aggressive rate cuts. The upcoming focus includes speeches from Fed officials and earnings reports from media firms such as Walt Disney, Fox, and Warner Music Group. Additionally, Chinese companies like Alibaba, Uber, and Arm Holdings, along with companies like Eli Lilly, ConocoPhillips, and PepsiCo, are set to report, providing insights into expectations for 2024. The economic calendar for the week is quieter, with attention on weekly jobless claims. Consequently, it could impact the overall US stock market, with the anticipation of trading remaining relatively stable in the upper range or experiencing a slight decline during this timeframe.

Data for Technical Analysis (5H) CFD US30 DJIA

Resistance : 38451.9, 38489.3, 38550

Support : 38330.5, 38293.1, 38232.4                       

5H Outlook

Source: Investing.com                    

Buy/Long 1 If the support at the price range 38230.5 - 38330.5 is touched, but the support at 38330.5 cannot be broken, the TP may be set around 38453.7 and the SL around 38280.0, or up to the risk appetite.

Buy/Long 2 If the resistance can be broken at the price range of 38451.9 - 38551.9, TP may be set around 38610.0 and SL around 38280.0, or up to the risk appetite.       

Sell/Short 1 If the resistance at the price range 38451.9 - 38551.9 is touched, but the resistance at 38451.9 cannot be broken, the TP may be set around 38294.9 and the SL around 38602.0, or up to the risk appetite.

Sell/Short 2 If the support can be broken at the price range of 38230.5 - 38330.5, TP may be set around 38136.0 and SL around 38501.0, or up to the risk appetite.       

Pivot Points Feb 6, 2024 02:51AM GMT