1, Stocks Fall as Bonds Turn Volatile on Fed Chair’s Comments
Dow 30 Futures, 4-Hour Chart Analysis
Fed Chair Jerome Powell continues to be the most important person for global financial markets, and yesterday, the central banker gave a surprisingly upbeat speech about the US economy, causing a dip in global equity markets and a rally in short-dated Treasury yields. As traders are trying to figure out the next step by the Fed amid the strong international headwinds, we are back to the ‘good news is bad news’ setup on Wall Street, since the relatively strong US economic numbers have been met with selling in stocks due to the Fed’s stance.
While the relatively weak European benchmarks got hit harder yet again today, the major US indices are also lower, and the Dow and the S&P 500 broke below their rising short-term trendlines. Given the overbought momentum readings and the broader downtrends in the global benchmarks, downside risks remain dominant in equity markets. The increased risks of another US government shutdown is also weighing on sentiment, but volatility remains relatively low, and with no major catalysts present, the indices might not be ready to roll over for good yet.
2, Dollar Index Nears One-Month High as Euro Hit by Economic Weakness
Dollar Index, 4-Hour Chart Analysis
While stock markets are likely forming a short-term top, forex markets are very active again, and the Dollar’s painful push higher continues against the major risk-on currencies. While the Yen is firm thanks to the slight bearish shift in investor sentiment, the Euro continues to fall, with yet another round of negative economic surprises coming on from the Eurozone.
Italian Retail Sales and German Industrial Production both missed the consensus estimates by hefty margins,