U.S. Opening Bell: USD Soars; Oil Steadies; Russell 2000, NASDAQ Hit New Highs

During yesterday's US session, a tech sector rally and a rise in oil prices drove equities higher, easing investor worries over a global trade war.

Treasury yields climbed accordingly, as investors dumped bonds in favor of stocks. The S&P 500 gained 0.17 percent, with Communications Systems (NASDAQ:JCS) led the climb (+1.24 percent). Shares in the Materials sector—the most exposed to tariff uncertainty—lagged (-0.32 percent), underscoring some lingering investor caution over trade headwinds.

The NASDAQ Composite rallied 0.7 percent and hit a fresh record, on both a closing and new high basis. Leading the tech rally: Facebook (NASDAQ:FB), which also posted a record high and close; Alphabet (NASDAQ:GOOG) came in within 60 cents of its January 29 record high and Microsoft (NASDAQ:MSFT) completed a bullish Falling Flag.

Facebook jumped 2.3 percent. Shares crossed the $200 mark for the first time, closing at $202. The stock benefited from the news that its Instagram platform hit 1 billion users. FB CEO Mark Zuckerberg is now just a mere $29 million away from Warren Buffet’s net worth.

But it was the Russell 2000 to steal the limelight, gaining a further 0.8 percent to seal another record in a string of winning sessions since mid-May. The small-cap index strength shows that the global trade war narrative is penalizing large-cap stocks.

Only the export-reliant shares in the Dow retreated, by 0.17 percent. It’s almost as if the same investors who sold the Dow bought the SPX. However, the Dow managed to remain well above a dual support by Wednesday’s hammer and an uptrend line since the April low.

Canada’s S&P/TSX Composite gapped higher, closing up 0.65 percent. It posted a fresh record, led by cannabis stocks, after the country's Senate put the final stamp on its legalization.

The USD gained 0.15 percent, for an aggregate four-day rally of 0.50 percent. The surge in Treasury yields helped the greenback gain against almost every major FX peer on Wednesday, even as US notes steadied and European bonds drifted. The dollar reached the highest level since July 13 yesterday, trimming trimming a 12 percent plunge to roughly 5 percent the 12 percent, in place since Trump told the Wall St. Journal that too strong dollar “is killing us.”

The pound weakened ahead of today's Bank of England's rate decision. Technically, the slide extends a trough that's lower than the 1.3205, May 29 low, confirming a falling channel since mid-April, after the cable executed a Death Cross, when the 50 DMA (green) crosses below the 200 DMA (red), a major sell signal for trading systems that follow statistical price comparisons.

West Texas oil slipped to $65.05 a barrel, ahead of tomorrow's crucial OPEC meeting which will decide on output. Technically, the fifth day consolidation forms a pennant, making it the third consecutive continuation pattern, something we have seen perhaps for the first time.

New Zealand’s dollar fell to its weakest point in six months after data showed first-quarter growth slowed, bolstering the case for the central bank to keep rates at a historic low. On the other hand, further weakening could push the USDNZD pair to complete a massive bottom since September 2016. Would the central bank want the pair to weaken another 10 percent, roughly the target of the pattern?

h2 Up Ahead/h2

• European Union representatives Jean Claude Juncker and Michel Barnier meet with the Ireland’s Taoiseach Leo Varadkar in Dublin on Thursday to discuss the status of the Irish border once the UK leaves the European Union. The border between Northern Ireland and the South is the only land border between the UK and the EU.

• Also, on Thursday: US jobless claims.

• Bank of England Governor Mark Carney and Chancellor of the Exchequer Philip Hammond will deliver speeches at Mansion House on Thursday.

• The Organization of Petroleum Exporting Countries meets in Vienna on Friday.

h2 Market Moves/h2

Stocks

• The UK’s FTSE 100 dropped 0.5 percent, falling from its highest level in a week earlier in the session.

• The STOXX Europe 600 edged 0.3 percent higher, the largest gain in a week.

• Futures on the S&P 500 gained 0.2 percent.

• Germany’s DAX gained less than 0.05 percent.

• The MSCI Emerging Market Index slipped 0.8 percent to the lowest level in almost nine months.

• The MSCI Asia Pacific Index slid 0.6 percent to the lowest level level in more than six months.

Currencies

• The British climbed fell 0.3 percent to $1.3212, rebounding from seven month lows earlier in the session.

• The Dollar Index advanced 0.3 percent to the highest level in about a year.

• The euro dropped 0.3 percent to $1.154, the weakest level in 11 months.

• The Japanese yen slid 0.3 percent to 110.64 per dollar.

• The Turkish lira slipped 0.7 percent to 4.7639 per dollar, the weakest level on record.

Bonds

• Britain’s 10-year yield gained less than one basis point to 1.297 percent.

• The yield on 10-year Treasuries lost one basis point to 2.93 percent.

• Germany’s 10-year yield climbed less than one basis point to 0.38 percent, the largest increase in more than a week.

• Italy’s 10-year yield dropped less than one basis point to 2.55 percent.

Commodities

• West Texas Intermediate crude declined 0.6 percent to $65.32 a barrel.

• Gold dipped 0.4 percent to $1,262.83 an ounce, hitting the weakest in six months with its fifth consecutive decline.

• Brent crude fell 0.9 percent to $74.10 a barrel.

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