STATE OF THE MARKETS
Stocks mixed as inflation hit 40 years high. US stocks closed mixed on Tuesday after a hot inflation was reported at +8.5% YoY vs +6.5% expected, a 40 year highs. Major indices of Dow (-0.26%), S&P (-0.34%) and Nasdaq (-0.30%) closed in the red, while the small cap Russell (+0.33%) managed to eke some gains. Some flight to safety was noted as yields fell lower, with the benchmark 10Y settled at 2.73% after hitting a high of 2.84% for the day. Cash demand for Dollar continues to rise with the Dollar index breaking above 100.50 at writing.
In the commodities market, crude rebounded and settled higher above $100.50/bl after OPEC reported its inability to replace Russian production. Inflation concerns continue to plague markets, sending gold higher to $1,978.45/oz before settling around $1,966.45/oz as New York closed. Elsewhere, iron ore continues to slide lower to $155.50/tn as bidders see less demand amid China lockdown.
In the FX space, Aussie and Kiwi continued to be dumped in the medium term accounts while short-term traders returned to demand the commodity currencies. Long term sentiments turned bearish as King Dollar advanced further in the demand territories while Euro sent Kiwi to offers.
On Wednesday, markets await new development on Russia-Ukraine peace talks while looking for earnings reports from Blackrock (BLK), JPMorgan (JPM), First Republic Bank (FRC), Bed, Bath & Beyond (BBBY) and Delta Airlines (DAL) as well as the latest number on US mortgage application index and producer price index. EIA petroleum status will be in the spotlight for energy traders.
OUR PICK – No New Stock Pick
Further consolidation in US equities. Looking at the chart of the S&P 500 index, we noticed similar zig zag pattern and an upward motive from the Dow. The low this week of around 4,380s represent a 50% pullback and formed a downward motive that signaled more consolidation is on the way. We wouldn’t be surprised if the Dollar index continue to climb higher past 100.50 as cash demand at this time is high.
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