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Market Overview

U.S. Stocks Snap Six-Day Winning Streak as Volatility Spikes

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U.S. stocks backtracked on Monday, as investors took a breather ahead of an earnings-filled week for Wall Street.

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Stocks Slide From Record Territory

Wall Street was down across the board Monday, with the benchmark S&P 500 Index falling 0.4% to close at 2,564.98. Ten of 11 sectors finished in negative territory, with telecommunications falling 1%.

Shares of industrials companies fell 0.8%. Discretionary stocks were also down 0.7% as a sector.

The Dow Jones Industrial Average declined 54.67 points, or 0.2%, to finish at 23,273.96.

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Meanwhile, the technology-heavy Nasdaq Composite Index fell 0.6% to 6,586.83.

A measure of expected volatility known as the CBOE VIX spiked to six-week highs on Monday. Wall Street’s preferred measure of investor anxiety rose 11% to close at 11.07. The VIX trades on a scale of 1-100, but has hovered in the 10-15 region for the better part of two years. The volatility gauge has also spent most of the past four weeks in single-digit territory, signaling prevailing calm on Wall Street.

Monday marked the end of a six-day winning streak for the S&P 500 and Dow, including a streak of continuous record highs. The major bourses surged last week after GOP lawmakers passed a budget bill, setting the stage for much-needed tax reform.

Earnings on Deck

A flurry of Q3 earnings will drive the equity markets this week, giving investors the latest glimpse of corporate health.

Dow blu-chips 3M Co (MMM), Caterpillar Inc. (CAT) and United Technologies Corp (UTX) are scheduled to report on Tuesday. General Motors Co (GM) and AT&T Inc. (T) are also on the earnings docket.

Reporting on Wednesday are Coca-Cola Co (KO) and Visa Inc. (V). Software giant Microsoft Corp (MSFT) and online retailer Amazon (AMZN) are due to release quarterly earnings on Thursday.

Energy giant Exxon Mobil Corp (XOM) rounds out the week with a Friday earnings call.

The full earnings schedule can be found on Bloomberg.

Featured image courtesy of Shutterstock.

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4.5 stars on average, based on 153 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

Daily Analysis: Stock Rally Fades as Walmart Weighs on Sentiment

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Monday Market Recap

Asset Current Value Daily Change
S&P 500 2715 -0.73%
DAX 12,487 0.81%
WTI Crude Oil 61.56 0.02%
GOLD 1331.00 -1.84%
Bitcoin 11720 6.24%
EUR/USD 1.2336 0.61%

It’s been another very hectic session in US equities, with the main indices diverging substantially, as it has been the case ever since the market made it back to the key break-down levels of the crash two weeks ago. The rally through those key levels was not an easy feat, as we expected, and although the Nasdaq cleared the hurdle last week, and even added a bit to its gains today in early trading, the S&P 500 and the Dow failed to follow the tech benchmark.

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S&P 500, 4-Hour Chart Analysis

The Dow has been pushed lower by Wal-Mart (WMT) throughout the day, as the retail giant (now officially named Walmart) disappointed with its earnings report, with especially the crucial on-line segment missing the growth estimates, putting WMT’s quest against Amazon into doubt. Jeff Bezos’s crown jewel popped higher after the release and that helped to widen the gap between the Dow and the Nasdaq.

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WMT, 4-Hour Chart Analysis

A monster-sized Treasury issuance was the other main event of the day, as bond markets are still nervous because of the rapid rise in yields, but the market absorbed the bonds without any major issues and yields finished the day little changed.

We maintain our bearish short-term view on stocks, despite the strength in the Nasdaq, and a test of the correction lows still seems likely in the coming weeks, but as the long-term uptrend is still intact short positions should still be treated as counter-trend trades, with strict risk management.

Forex Markets and Commodities

EUR/USD, 4-Hour Chart Analysis

The Dollar, which rallied strongly in early trading, remained stable compared to its main peers amid the Treasury issuance and the stock sell-off, with even the safe-haven Yen failing to rally against the Greenback. The reserve currency gained significant ground against commodity-related Aussie and Loonie too, and we expect that trend to continue, should the re-test in the stock indices materialize.

Oil had a mixed session, with an early rally and a late sell-off, similarly to stocks, as the further escalation of the Syrian conflict remains a gloomy option for the Middle East, while the broader market trends and the US supply surge are pushing the price of crude lower.

Gold also pulled back yet again of its rally highs, continuing its correction, as the Dollar strength hurt precious metals despite the late-day risk-off shift.

Cryptocurrencies

The segment had a mixed day, with Bitcoin gaining and most altcoins losing ground, in the wake of the bullish news flow surrounding the largest coin. The slight increase in volatility in US stocks “spilled over” to the crypto market in late trading, with most coins finishing the US session on a negative note.

While the losses were relatively small in most valuable digital currencies like Ethereum, Ripple, NEO, Bitcoin Cash, and Cardano, the real outlier was Litecoin, which pushed above $250 after breaking-out from its short-term correction, while also weathering the late-session sell-off.

Stellar/USDT, 4-Hour Chart Analysis

Stellar and IOTA were the weakest majors, losing more than 5% on the day. Stellar now gave back most of its post-crash relative strength, as it remains stuck in a broad declining trend, although it is still well above the crash lows, and a break-out remains likely in the coming week, similarly to the other slightly lagging coins.

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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4.7 stars on average, based on 101 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

Market Update: U.S. Stocks Snap Six-Day Rally as Dow Tumbles 254 Points

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U.S. stocks declined sharply on Tuesday following the holiday weekend, as rate-hike jitters and a steep drop in Walmart shares weighed on investor sentiment.

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Stocks Decline

The Dow Jones Industrial Average declined by as much as 335 points on Tuesday. It would later pare losses near the close to finish down 254.63 points, or 1%, at 24,964.75.

Twenty-five of 30 index members recorded losses, with Walmart (WMT) plunging more than 10%. The retailing giant reported adjusted earnings of $1.33 per share in the most recent quarter, missing forecasts of $1.37. It also reported a 23% drop in e-commerce sales, raising fresh worries about its short-term outlook.

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The broader S&P 500 Index fell 0.6% to finish at 2,716.26, with ten of 11 sectors reporting declines. The steep drop in Walmart dragged the consumer staples category down by more than 2%. Healthcare, telecommunication services and utilities also finished sharply lower.

Meanwhile, the technology-driven Nasdaq Composite Index pared losses to finish at 7,2434.31, where it was down 0.1% from Friday’s close.

A measure of 30-day volatility known as the CBOE VIX rose on Tuesday for a second straight session, climbing more than 6% to close at 20.69. The so-called “fear index” is trading right around the historic average following an unprecedented surged in volatility at the beginning of February.

Wall Street Rounding Out Solid Earnings Quarter

Despite Walmart’s miss, corporate earnings have largely outpaced forecasts during the fourth quarter. With 80% of S&P 500 companies reporting, three-quarters have posted better than expected earnings, according to financial research firm FactSet. More than three-quarters (78%) have also reported revenue surprises, the largest such figure since FactSet began tracking this category in Q3 2008.

S&P 500 companies are on track for a year-over-year blended earnings growth rate of 15.2%, which is the highest since 2011.

Cryptocurrencies Hold Steady Above $500 Billion

The cryptocurrency market held relatively steady on Tuesday, with the total market cap well north of $500 billion. The market peaked at $516.8 billion on Tuesday, and was last seen around $508.8 billion.

Bitcoin and Litecoin were the biggest gainers on Tuesday while the other major reported modest declines. Bitcoin’s market cap crossed $200 billion as the coin’s value approached $12,000 for the first time in three weeks.

Litecoin also climbed nearly 10% to $246 following a hard fork of the digital currency this weekend. Litecoin continues to be one of the market’s best performers, having added more than 53% over the last five days.

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 153 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

Pre-Market: US Stocks Return on a Bearish Note after Long Weekend as Dollar Rallies

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After the hectic session on Friday, US equities took a long break thanks to the Presidents’ Day yesterday, but the technical setup that we have been monitoring remained intact. The major indices formed a short-term top exactly in the Line-In-The-Sand area that seemed likely to stop the post-crash rally at least temporarily.

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S&P 500, 4-Hour Chart Analysis

The key levels to watch during today’s session will likely be 2735 and 2700 in the S&P 500 (25350 and 24800 in the Dow), but below 2735 the benefit of the doubt is on the bears’ side.

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So short-term, we continue to lean on the bearish side here, at least short-term and we expect the market to head for a test of the correction lows in the coming period. European and Asian markets continue to underperform their US peers, despite the strength in the Dollar, and that doesn’t bode well for bulls, as Europe has been spearheading the decline so far.

Dollar Still in the Center of Attention

EUR/USD, 4-Hour Chart Analysis

Europe bounced higher today following the release of the better than expected (but worse than the latest) German ZEW Economic Report but that didn’t stop the drift lower in the common currency. The EUR/USD pair fell back below 1.2350 after the fake-out on Friday that indeed proved to be a bull trap as we speculated, and a test of the rising trendline is now possible in the coming days.

USD/JPY, 4-Hour Chart Analysis

On a positive note, the main safe-haven assets, the Japanese Yen and Gold, are also losing ground to the Greenback today, and that could point to a less significant shift in the risk appetite of investors.

That said, commodity currencies are still under pressure, and they have been a good proxy so far for judging the risk-on/risk-off divide, and with oil and copper turning lower this morning, another round of selling could be underway.

WTI Crude Oil, 4-Hour Chart Analysis

Looking at the bond markets, rates are edging higher across the yield curve and the Volatility Index (VIX) is also on the rise again, and all looks set for another active day in US markets, with plenty of trading opportunities in equities and currencies alike.

We expect Wednesday to be the most interesting day of the week, as the arguably most important release, the FOMC meeting minutes will come out in late trading. Until then, the volatile, technicals-led trading could continue.

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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4.7 stars on average, based on 101 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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