Equity Markets tumbled after a U.S. health official warned against a premature reopening of the economy and as traders assessed a dire outlook from Federal Reserve regional chiefs. Treasuries and the US Dollar climbed. The S&P 500 extended losses as Anthony Fauci, the nation’s top infectious disease official, said States reopening too quickly could “set you back on the road on trying to get economic recovery.” Meanwhile, some central bank officials said the virus outbreak and a partial shutdown would risk massive bankruptcies that could create a lasting scar. The Fed could curtail Wall Street banks’ ability to pay dividends by cranking up the amount of capital they need to maintain due to the Coronavirus crisis, Governor Randal Quarles said yesterday. “You will get business failures on a grand scale and you will be taking risks that you would go into depression” if shutdowns persist, Federal Reserve Bank of St. Louis President James Bullard said in a video speech from that city Tuesday. Minneapolis Fed President Neel Kashkari warned of a “gradual, muted recovery” from the outbreak, while Dallas Fed President Robert Kaplan said the economy will need more fiscal stimulus if the Jobless Rate continues to rise. The disastrous fallout of business closures and stay-at-home orders caused an unprecedented 20.5 million job losses in April, tripling the Unemployment rate to 14.7%, the highest since the Great Depression era of the 1930s. A key measure of U.S. consumer prices declined last month by the most on record. A sustained trend of declining prices would spur worries about deflation, exacerbating concern that the recovery from the deep economic downturn will be very slow. Buyers of U.S. stocks after the economy shrank in the first quarter have history on their side. Gross domestic product contracted at an annual rate of 4.8%, marking the 13th quarterly decline of more than 4% since 1949, according to data compiled by Bloomberg. After each previous instance, the S&P 500 gained more than 10% during the next 12 months.
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The S&P 500 decreased 2.1%, closing at a price of 2870.
The Dow Jones fell 457 points, for a 1.9% dip, closing at 23,764.
The NASDAQ 100 closed 2% lower at 9112.
The Stoxx Europe 600 Index rose 0.3%.
The MSCI Asia Pacific Index dipped 0.7%.
Here is a summary of the main Changes in F.X. Markets:
The Bloomberg Dollar Spot Index rose 0.1%.
The Euro climbed 0.4% to $1.0849.
The Japanese yen strengthened 0.4% to 107.19 per dollar.
The yield on 10-year Treasuries declined five basis points to 0.66%.
Germany’s 10-year yield rose one basis point to -0.51%.
Britain’s 10-year yield declined two basis points to 0.249%.
The Bloomberg Commodity Index fell 0.4%.
West Texas Intermediate crude rose 6.4% to $25.69 a barrel.
Gold climbed 0.5% to $1,705.80 an ounce.
This morning on the Economic Front we already had the release of UK GDP. QI GDP came in better than the -2.6% expected with a -2% print. Meanwhile the March Monthly GDP printed -5.8% versus -7.9% expected. Also released at 7.00 am was the UK Trade Balance. This was worse than the £-10 billion expected with a £-12.5 billion print. At 10.00 am we have Euro-Zone Industrial Production and this is followed at 12.00 pm by the U.S MBA Mortgage Applications. Next we have PPI at 1.30 pm and a live video call with Fed Chairman Powell at 2.00 pm. Finally, at 4.00 pm we have a speech from ECB Member De Guindos.
June S&P 500
The S&P traded in a range between 2910/2925 for most of the session before late comments from the WHO’s Fauci saw the S&P get slammed into the close and again overnight before staging an early morning rally to sit at 2862 as I go to press. My S&P plan did not work well as after I bought the market at a 2883 average level I was stopped out of this trade a few minutes later at 2864 and I am still flat. There is no doubt that with the US States opening earlier than warranted, it is likely we will see a second surge in Corvid 19 as a vaccine seems many months away at best. However, with the level of intervention from the Fed it is extremely difficult to be short the S&P. In my opinion we need to see a break and close below 2727 for me to turn bearish. The S&P has initial support from 2812/2828 where I will be a buyer with a 2795 stop. I will be an aggressive buyer on any move lower to 2727/2747 with a wider 2708 stop. My only interest in selling the S&P is from 2895/2915 with a tight 2928 stop.
My Euro plan worked well with the market trading higher to my 1.0875 sell level before selling off to trade at 1.0840 this morning. As I wanted to be flat overnight I covered this short position at my 1.0865 revised T/P level and I am now flat. Today, I will be a seller from 1.0890/1.0930 with a tight 1.0965 stop. Meanwhile, I will leave my 1.0700/1.0745 buy level unchanged with the same 1.0665 stop.
June Dollar Index
Shortly after the Dollar hit my 99.75 buy level I emailed my Platinum Members to exit any long position for a small gain at 99.83 and I am still flat. This morning the Dollar is trading higher at 100.05. With Powell speaking this afternoon I will again look to buy the Dollar on any dip lower to 99.10/99.60 with a 98.75 stop.
My DAX plan worked well, helped by the late sell-off into the New York close which saw me buy the market at 10610. This morning the DAX opened higher and I have now exited this position at 10695. The DAX has good support from 10390/10510 where I will be a buyer with a 10315 stop.
After the FTSE traded higher to my 5990 sell level the FTSE made a high of 6008 before getting slammed overnight to hit a low of 5850. Unfortunately I covered this short position at my revised 5965 T/P level and I am still flat. As I have mentioned countless times over the past few months that the FTSE has been the market leader to the downside. It continues to trade heavy and has major resistance at the 6000/6200 area. Today, I will be a seller from 5970/6050 with a 6105 stop.
Dow Rolling Contract
Overnight the Dow traded the whole of my buy range for a 23625 average long position before rallying to my revised 23775 T/P level as emailed to my Platinum Members earlier this morning and I am now flat. The Dow has strong support from 23150/23390 where I will be an aggressive buyer with a 22990 stop. Ahead of the Powell speech this afternoon I do not want to be short the market at this time.
My NASDAQ plan worked well with the market trading higher to my 9330 sell level before selling off to my 9240 T/P level and I am still flat. Overnight the NASDAQ hit a low so far at 8997 before bouncing 100 points. The NASDAQ has strong support from 8825/8925 where I will be an aggressive buyer with an 8745 stop. My only interest in selling the market is from 9210/9360 with a 9450 stop.
I am still flat the Bund which just missed my buy level before rallying after the late sell-off in Equity Markets. I will now raise my buy level to 172.45/172.95 with a 171.99 stop.
Gold Rolling Contract.
The boring sideways price action in Gold continues and I am still flat. I do not trust this move higher in Gold and today I will leave my 1674/1684 buy level unchanged with the same 1665 stop.
Silver Rolling Contract
I am still flat and I will now raise my buy level to 14.70/15.10 with a higher 14.32 stop.