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Tech Selloff Weighs on Wall Street as Volatility Rises for Sixth Straight Day

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U.S. stocks traded mixed on Monday, as a selloff in the technology sector weighed on Wall Street amid general optimism over President Trump’s tax overhaul.

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Stocks Mixed

The S&P 500 surged to record highs through the intraday before experiencing a sharp reversal in the afternoon. The large-cap index settled down 0.1% at 2,639.44.

Technology stocks were responsible for the lion’s share of the volatility on Monday. The sector plunged 1.9%, with software and semiconductors leading the decline.

Other sectors to report losses were healthcare and utilities, which fell by 1.2% and 10.6%, respectively.

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Losses in these segments offset healthy gains in six sectors, as telecommunication services, materials, financials and consumer discretionary stocks each adding 1% or more.

A selloff in technology dragged the Nasdaq Composite Index 1.1% lower. It finished at 6,775.37.

Tech troubles failed to dent the Dow Jones Industrial Average, which climbed to new record highs on Monday. The blue-chip index rose 58.46 points, or 0.2%, to close at 24,290.05. It was up by more than 200 points earlier in the session.

Eighteen of 30 Dow benchmarks contributed to the gains, with the likes of Walt Disney Co (DIS) and The Home Depot Inc. (HD) offsetting heavy declines in Microsoft (MSFT) and Visa Inc. (V).

Volatility Rising

A measure of implied volatility known as the CBOE VIX rose on Monday for a sixth straight session, climbing 2.2% to 11.68. While still very low by historical standards, the VIX is currently at its highest level in over two weeks.

Interestingly enough, Vol has been rising even as stocks recorded new record highs. Conventional wisdom states that the VIX falls when stocks rise and vice versa.

The index is down nearly 17% this year, having on multiple occasions reached new record lows.

Trump Tax Optimism

Equities roared out of the gate on news that Senate Republicans are united on passing new tax legislation shortly. President Donald Trump is pushing for a resolution before the holidays as the GOP reconciles slightly different variations of the bill proposed by both the House and Senate.

The proposed bill includes $1.4 trillion in tax cuts. It aims to lower the corporate tax rate by 15 percentage points to 20%, rewrite international business tax rules and initiate a temporary lowering of individual tax rates.

In response, Senate Democrats are standing together to oppose the Republican overhaul, claiming that it unfairly serves the rich.

Trump responded Saturday by issuing the following statement: “We got no Democrat help and I think that’s going to cost them in the election because they voted against tax cuts. I don’t think politically it’s good to vote against tax cuts.”

Tax reform was a major item on Trump’s legislative agenda after failing to repeal and replace Obamacare, which was another important campaign promise.

Economic Data

In terms of data releases, the Commerce Department reported a smaller than expected drop in factory orders on Monday. Orders for factory goods slipped 0.1% in October, following an upwardly revised gain of 1.7% the month before. Analysts in a median forecast called for a 0.4% drop.

U.S. employment data will make headlines in the latter half of the week, including the all-encompassing November nonfarm payrolls report on Friday. The monthly report is expected to show the creation of 198,000 jobs last month, following a gain of 261,000 in October. The jobless rate is expected to hold steady at 4.1%. Average hourly earnings – a key proxy for wage inflation – is expected to climb 0.2% month-on-month.

On Wednesday, ADP Inc. will private an advance estimate of the private sector component of the monthly jobs data. That report could show the creation of 190,000 private payrolls last month.

Disclaimer: Author is invested in the U.S. equities market at the time of writing. 

Featured image courtesy of Shutterstock. 

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.5 stars on average, based on 452 rated postsSam Bourgi is Chief Editor to Hacked.com, where he specializes in cryptocurrency, economics and the broader financial markets. Sam has nearly eight years of progressive experience as an analyst, writer and financial market commentator where he has contributed to the world's foremost newscasts.




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Market Overview

Market Update: Stocks Slide as U.S.-China Trade War Risks Reemerge

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U.S. stocks declined Friday, with the Dow briefly falling more than 200 points after the Trump administration moved ahead with planned duties on Chinese goods, reigniting fears of a global trade war.

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Stock-Rally Falters

Risks of an all-out trade war dragged equity prices lower, with all of Wall Street’s major indexes posting declines. The Dow Jones Industrial Average fell 84.83 points, or 0.3%, to 25,090.48 with the likes of Caterpillar Inc. (CAT), and Chevron Corp (CVX) leading the declines.

The broader S&P 500 Index fell 0.1% to 2,779.42, with the majority of its primary sectors booking losses. Industries tied to primary goods were among the biggest decliners.

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The Nasdaq Composite Index fell from record levels, declining 0.2% to 7,746.38.

Implied volatility, as measured by the CBOE VIX, rose briefly on Friday before reversing gaind later in the session. The VIX fear index settled below 12 on a scale of 1-100 where 20 represents the historic average.

Trump Announces Tariffs

The Trump administration is moving forward with a plan to tax up to $50 billion in Chinese goods, sending a strong signal to Beijing that it will no longer tolerate theft of intellectual property.

A charge of 25% will be applied to Chinese goods that “contain industrially significant technologies,” President Trump announced Friday. The measures come “in light of China’s theft of intellectual property and its other unfair trade practices.”

Beijing responded swiftly by announcing it will implement import duties on the same scale as Washington. Neither country commented on the products that will be impacted.

China’s response was expected by President Trump, who said he would impose more tariffs if Beijing retaliates. Currently, the U.S. purchases far more from China than the other way around, which gives Washington some leeway in its tariff policy.

Investors are generally averse to any sign of protectionism in global markets, but this hasn’t stopped the Trump administration from recalling several of its current trade regimes in an effort to trim Washington’s deficit. Last  month, President Trump confirmed that Canada, Mexico and the European Union would be subject to import duties on steel and aluminum products.

Cryptocurrencies Stabilize After Tumultuous Week

The global cryptocurrency market stabilized Friday, as bitcoin rebounded from oversold levels and altcoins led by EOS reported gains.

All cryptocurrencies in circulation are collectively valued at $282.5 billion, according to CoinMarketCap. The market bottomed near $264 billion on Wednesday.

A top U.S. regulator delivered good news for cryptocurrency traders when he declared Ethereum not to be a security. Speaking at the Yahoo All Markets Summit event in San Francisco Thursday, SEC director William Hinman said Ethereum is too decentralized to be a security, which means it is in the same category as bitcoin.

The SEC has yet to issue a formal decree on Ethereum and it is not entirely clear whether a federal judge will agree with Hinman’s assertion. Advocates for Ethereum have rejoiced nevertheless given the ongoing debate over ether’s possible security status.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.5 stars on average, based on 452 rated postsSam Bourgi is Chief Editor to Hacked.com, where he specializes in cryptocurrency, economics and the broader financial markets. Sam has nearly eight years of progressive experience as an analyst, writer and financial market commentator where he has contributed to the world's foremost newscasts.




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Analysis

Stocks Pull Back as Euro Rebounds after Carnage

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Stocks are broadly lower today after yesterday’s mixed session, as European equities, which performed much better following the ECB’s meeting, also turned lower, following the major US indices. The losses are limited, as volatility remained relatively low, despite the week’s central bank bonanza that caused turmoil across asset classes.

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NASDAQ, 4-Hour Chart Analysis

The NASDAQ is still the strongest among the main benchmarks, while the Dow is the weakest, dragged lower by the weakness in financials and the energy segment. Small caps are still outperforming the broader indices together with tech stocks, and Trump’s new tariffs targeted at China boosted the segment yet again today.

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EUR/USD, 4-Hour Chart Analysis

The EUR/USD forex pair has been in the center of attention in the last couple of days as expected, while currencies turned volatile across the board in the aftermath of the Fed’s and the ECB’s monetary meetings. The Dollar index surged higher, boosted by the weakness of the common currency and after a brief positive period that weighed somewhat on stocks and other risk assets.

Economic releases were mixed today after a strong weak, at least in the US, as the Empire State Index and the UOM Consumer Sentiment Index were better than expected while Industrial Production slightly missed the consensus estimate. The Eurozone CPI was in line with expectations, while Canadian Manufacturing Production missed by a mile, putting further pressure on the already weak Canadian Dollar.

Commodities Smacked Lower amid Risk-Off Shift

Currencies were by far the most active assets, as we expected after the dovish surprise by the ECB yesterday, with the Dollar’s strength affecting the majors and the recently weak emerging market currencies as well.

USD/TRY, 4-Hour Chart Analysis

The initial bullish reaction in commodities and emerging currencies quickly faded, as the fragility of the most vulnerable countries continues to pose contagion risk, and although the Brazilian Real and the Turkish Lira are both above their recent lows, the charts still look dangerous.

WTI Crude Oil, 4-Hour Chart Analysis

The Dollar’s strength put an end to oil’s bounce, as the WTI contract fell back below the $65 per barrel level, while gold is also testing its lows from May. Oil looks bearish before next week’s OPEC meeting, but the outcome of the event is as hard to predict as ever, especially given the recent volatility in the price of the Black Gold.

Featured image from Shutterstock

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.6 stars on average, based on 275 rated postsTrader and financial analyst, with 10 years of experience in the field. An expert in technical analysis and risk management, but also an avid practitioner of value investment and passive strategies, with a passion towards anything that is connected to the market.




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Market Overview

Draghi Scores & Cryptos Celebrate

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Hi Everyone,

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Finally some much-needed clarity!

Just when some feared all was lost and crypto prices were showing signs of a potential plunge, some exciting news was delivered from the SEC in the United States, bringing with it the kind of optimism that we haven’t seen in months.

The crypto markets are now celebrating and have given a strong push off the lows.

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It seems the title of yesterday’s daily market update “A Crypto U-turn” was more appropriate than originally intended.

Let’s examine the impact of the SEC’s decision below.

@MatiGreenspan
eToro, Senior Market Analyst

Today’s Highlights

  • Draghi Scores a Goal
  • Tiki-taka Stocks
  • Ethereum Uncertainty Removed

Please note: All data, figures & graphs are valid as of June 15th. All trading carries risk. Only risk capital you can afford to lose.

Traditional Markets

It was a perfect play by the European Central Bank. They’ve been worrying for months about the strength of the Euro and finally, at the 90th minute, they managed to pull off a power play that brought the ball all the way to the goal line.

The timing was impeccable. On Wednesday, the ECB’s counterpart in the United States announced a more aggressive monetary policy and plans to raise their interest rates more rapidly than expected.

At the same time, a decision was expected from the ECB to end their “money printing” stimulus package very soon.

During the press conference yesterday, the ECB not only confirmed the market’s expectations by announcing an end to the stimulus as of September but they also surprised everyone by indicating that they will not be raising their interest rates until the summer of 2019.

See, while everyone was concentrating on the striker (stimulus) and expecting him to kick the ball into the goalkeeper’s hands, he actually kicked it to his teammate (interest rates) who nobody was watching.

They haven’t quite won the match just yet though. Looking at the chart of the EURUSD, we can see that they failed to carry the Euro below the critical level of $1.15 and therefore any further downward pressure will be difficult to maintain.

Tiki-taka Stocks

The new policy divergence doesn’t seem to be affecting the stocks too much and with the US trade war expected to be notched up today, it seems they have other things on their mind.

Here’s a graph of the Dow Jones, which has been moving back and forth for most of this year without any real progress. Notice how it’s just taken a turn downward, towards the 50-day moving average (blue line).

Crypto Celebration!!!

The reaction from the crypto market yesterday was one of delayed gratification. In the United States, the authorities have been particularly ambiguous about the legal status of cryptocurrencies over the last few years.

While it was rather clear that Bitcoin itself should not be classified as a “security” the status of coins like Ether and Ripple’s XRP has remained a question. If a token is considered a security, it has some rather extreme implications for any person or business who traded it, including sizable fines and even the possibility of jail time for hodlers.

So, yesterday’s headline was certainly a cause for celebration.

The reaction was quick and clear across the entire crypto industry. Here we can see all of the cryptocurrencies traded on the eToro platform

Even though gravity does seem to be getting the better of the cryptos this morning, the announcement couldn’t have come at a better time. Here we can see the long-term chart of Ethereum and the beautiful bounce off the long-term trend line that the news has caused.

Now that Amecia seemingly has the freedom and security to trade Ether, this paves the way for big institutions like the CBOE and others to add Ethereum futures to their crypto offerings.

Let’s have a fantastic weekend!!

This content is provided for information and educational purposes only and should not be considered to be investment advice or recommendation.

The outlook presented is a personal opinion of the analyst and does not represent an official position of eToro.

Past performance is not an indication of future results. All trading involves risk; only risk capital you are prepared to lose.

Cryptocurrencies can widely fluctuate in prices and are not appropriate for all investors. Trading cryptocurrencies is not supervised by any EU regulatory framework.

Best regards,
Mati Greenspan
Senior Market Analyst

eToro: @MatiGreenspan | Twitter: @MatiGreenspan | LinkedIn: MatiGreenspan | Facebook:MatiGreenspan

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.7 stars on average, based on 101 rated postsSenior Market Analyst at Etoro.com.




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