Profit-taking continued in US stocks and Gold tested a significant technical support

CMC Markets

“Over optimism” unwinding was the theme seen in US stocks yesterday as the S&P 500 (-0.7%) and Nasdaq 100 (-0.8%) declined for a second consecutive session. The worst sector performer was Consumer Discretionary (-1.4%) dragged down by Amazon (-2.3%) which was the sector biggest component stock.

Financials were not spared as well, down by -1.1% as Bank of America and Wells Fargo tumbled by -5.3% and -6.0% respectively post earnings releases. Even Goldman Sachs ended the session almost unchanged (+0.2%) despite earnings beat by a wide margin from consensus estimates; earnings per share were at a record of US$9.68 versus US$5.54 consensus, led by a surge in fixed-income trading revenue.

The chances of seeing the 2nd US fiscal stimulus package approved before the November 03 election were getting slimmer after Treasury Secretary Steve Mnuchin commented that it would be “difficult” as differences among stakeholders remained “wide apart”.

WTI crude oil futures rose by +2.3% to close yesterday US session at US$41.11 per barrel, coming close to a medium-term range resistance of 41.70 that was established since 18 September 2020. The intraday surge in oil price had led to a rebound in US energy stocks; the S&P Energy sector ETF gained by +0.4% to close at 30.52 but its medium-term downtrend remains intact as price action continued to trade below the 50-day moving average (33.87).

US dollar was almost unchanged against the major currencies yesterday, the USD Dollar Index shed -0.14% and the GBP/USD rose as high by 128 pips before it pared back gains to close at 1.3011 in yesterday’s US session. The rally seen in the GBP/USD was Brexit news flow driven where UK indicated that it will not abandon the on-going negotiation talks with EU officials despite PM Boris Johnson’s October 15 deadline. The next important date on the timeline will be this Friday, 16 October when PM Boris will likely make a decision after the end of the EU leader’s summit which starts on Thursday.

Gold futures (COMEX) inched higher by +0.7% (1907) but the yellow metal seemed to be vulnerable for a potential breakdown below its ascending support in place since 24 September 2020 low (see chart of the day).

Chart of the day – Watch the 1889 support on Gold futures

Source: CMC Markets

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