Opening Bell: Equities Stall Despite Fed Easing Commitment; Gold, Dollar Rise

Opening Bell: Equities Stall Despite Fed Easing Commitment; Gold, Dollar Rise

Investing.com  | Jan 13, 2021 12:26

  • Fed officials' comments of continuous QE failed to boost equities
  • Treasury yields drop

Key Events

Statements from two Federal Reserve officials on Tuesday dispelling expectations that the US central bank would reduce quantitative easing anytime soon failed to lift equities in pre-US open trade on Wednesday. Futures on the Dow, S&P, NASDAQ and Russell 2000 all traded lower, having hit record highs in early January.

Both gold and the dollar traded higher.

Global Financial Affairs

In Europe, the STOXX 600 Index was mostly flat, with soft profit guidance}} from Danish wind farm developer Orsted (CSE:ORSTED) weighing on utilities and offsetting gains led by French grocer Carrefour (PA:CARR) following a merger approach by Canadian convenience store operator Couche-Tard (TSX:ATDb).

Stocks in Asia were mixed, with China’s Shanghai Composite (-0.25%) leading the declines among the major regional benchmarks due to concerns on rising virus cases in northern China as well as heightened tension in US-China relations. Sources in Washington say that President Donald Trump is still considering adding Alibaba (NYSE:BABA) and Tencent (NYSE:TME) to the China investment ban.

Japan’s Nikkei 225 (+1%) outperformed, extending a bull run to its fifth session in a row and hitting a 30-year high thanks to a rally in semiconductors on expectations of a strong recovery in the industry.

American shares crawled higher on Tuesday on conflicting coronavirus news. COVID-19 has reared its head again in China, and Sweden has announced tighter restrictions to reduce the spread of the virus while the ongoing vaccine rollout is still expected to facilitate the world moving on from the pandemic.

However, the story of the day was Treasuries, after Federal Reserve Bank of St Louis President James Bullard reiterated that the only policy on the Fed docket right now is getting the economy through the pandemic, with the same message repeated later by Boston Fed chief Eric Rosengren.

What is surprising, however, is that these statements did not prompt investors to increase risk or buy equities. Rather, they bought Treasuries. After all, investors should be happy to know that the Fed is avoiding repeating the 2013 “taper tantrum,” when the Fed began unloading its fattened spreadsheet, sending a ripple of panic that markets would collapse.

Also, falling yields should alleviate concerns of rising inflation and how that might affect any economic recovery from the worst recession since the Great Depression.

Is cheap money no longer enough to keep pushing stocks higher? Investors may have found themselves unsure what do amid the cacophony of headlines as the Democrats move to impeach President Trump for the second time.

The divide among Americans identifying with the two political parties has deepened, and the fallout can be seen on social media—both Facebook (NASDAQ:FB) and Twitter (NYSE:TWTR) banned Trump, while Google (NASDAQ:GOOGL), Amazon (NASDAQ:AMZN) and Apple (NASDAQ:AAPL) cut off Parler, an app conservatives were migrating to even before the Trump ban.

Yields, including on the 10-year note, gapped down—a rarity recently—after yesterday’s shooting star developed when rates failed to breach the top of a falling channel.

Treasuries Daily

Yields are likely to return toward the bottom of the channel, whose technical significance is underlined by the 50 DMA.

The dollar rebounded from a second-day loss to gain slightly.

Dollar Index Daily

Yesterday, it completed a bearish engulfing pattern, having neared the supported-resistance zone since Dec. 3 and the 50 DMA “guarding” the falling trendline.

Gold is squeezed between the 50 DMA resistance and the 200 DMA support.

Gold Daily

The yellow metal is struggling between the resistance of a falling channel in place after it hit its first record since 2011, during August 2020 and a potential H&S bottom.

Bitcoin found its footing on the support of Monday’s hammer, above the uptrend line since the Dec. 12 low.

Bitcoin Daily

Although the cryptocurrency's price and volume indicators provided sell signals, we still consider it a buying dip that provides an attractive risk-reward ratio if the timing is right.

Oil is on course for its longest upward streak in two years, after it neared the $54 level, for the first since Jan. 24—well before the pandemic hit markets.

Oil Daily

On the other hand, if the price closes at this point, it will have created a shooting star, while the RSI is the most overbought since April 2019.

Up Ahead

Market Moves

Stocks

Currencies

  • The Dollar Index gained less than 0.1% to 90.14.
  • The euro fell 0.1% to $1.2196.
  • The British pound climbed 0.1% to $1.368.
  • The Japanese yen was little changed at 103.74 per dollar.

Bonds

  • The yield on 10-year Treasuries decreased one basis point to 1.12%.
  • The yield on two-year Treasuries jumped less than one basis point to 0.15%.
  • Germany’s 10-year yield dipped three basis points to -0.50%.

Commodities

  • West Texas Intermediate crude rose 0.4% to $53.51 a barrel.
  • Gold strengthened 0.1% to $1,856.63 an ounce.

Investing.com

Related Articles

Latest comments

Add a Comment
Please wait a minute before you try to comment again.
Discussion
Write a reply...
Please wait a minute before you try to comment again.

Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.

English (USA) English (India) English (Canada) English (Australia) English (South Africa) English (Philippines) English (Nigeria) Deutsch Español (España) Español (México) Français Italiano Nederlands Português (Portugal) Polski Português (Brasil) Русский Türkçe ‏العربية‏ Ελληνικά Svenska Suomi עברית 日本語 한국어 简体中文 繁體中文 Bahasa Indonesia Bahasa Melayu ไทย Tiếng Việt हिंदी
Sign out
Are you sure you want to sign out?
NoYes
CancelYes
Saving Changes

+

Download the Investing.com App

Get free real time quotes, charts and alerts on stocks, indices, currencies, commodities and bonds. Get free top of the line technical analysis/predictors.

Investing.com is better on the App!

More content, faster quotes and charts, and a smoother experience is available only on the App.