STATE OF THE MARKETS
Stocks mixed amid safe-haven flows. US stocks closed mixed on Tuesday amid heavy bidding in the bonds market that sent yields lower across the board. Recession fears saw flight to safety in bonds, though investors remain in the lookout for the bottom in stocks. Nasdaq (+1.75%) rebounded the most, followed by Russell (+0.79%) and S&P (+0.16), while Dow (-0.42%) slid lower. Dollar jumped close to the 106.80 barrier on safe-haven bids as the 10Y benchmark fell to 2.82%.
In the commodities market, recession fears and Dollar strength sent major commodities lower with Crude settled below $97.80/bl, the first in three months. Gold was fixed lower, below $1764.50/oz, while iron ore fell deeper to $113.60/tn as markets sold off commodities.
In the FX space, sentiments were bearish as Yen seized the helm of demand in the short and medium term accounts while demand for safe-haven Swiss remained elevated across the board.
On Wednesday, markets expect to remain cautious while waiting for earning reports on Education Development Corp (EDUC), Global Medical REIT (GMRE), Saratoga Investment (SAR) and Simulations Plus (SLP) as well as the latest figures in US mortgage applications, PMI and services index and job openings. The latest FOMC minutes should confirm investors’ expectation of Fed’s rate hikes plan while the EIA petroleum status report will be in the spotlight for energy traders.
OUR PICK – No New Stock Pick
We stay on the sideline. Recession is almost imminent as the famous inversion indicator, 2Y (2.81%) now yields more than the 10Y (2.79%) on Wednesday morning. Feds watch showed 85% probability of another 75bps hike in July and this weighed on riskier assets. Sentiments are somehow mixed as flights to safety were accompanied by higher bids for growth stocks. Investors are expecting a market bottom soon but are not ready to plough in more capital at the moment.
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