The US stock markets had started the week on a weak footing with the S&P 500 declining by -1.16%, dragged down by the cyclicals and commodities related sectors (materials, industrials, energy) which recorded an average loss of around -3.30%.
The main theme was cantered around political gridlock and trade uncertainties. Following the passing of US Supreme Court Justice Ruth Bader Ginsburg, the grapevine had suggested that lawmakers would focus less on fiscal stimulus talks and more on a new appointee. On the US-China trade relations front, China media had reported that China was updating its “unreliability entity” blacklist without updating any affected companies. Meanwhile, a U-turn had emerged over Oracle Corp’s deal to take over TikTok as U.S. President Trump said that he would not approve the deal if TikTok’s Chinese parent company, ByteDance remains the majority shareholder of the service after Trump gave his initial “blessing” over the weekend.
In addition, the US financial sector recorded a loss of -2.49% triggered by a negative news flow that indicated major global banks were involved in US$2 trillion worth of suspected transactions related to money laundering or other criminal activities in the past two decades.
US technology stocks have managed to trim the losses towards the end of the US session led by gains in Apple (+3.03%) and Microsoft (+1.07%). However, market breadth remains weak with declining stocks outpaced advancing stocks as seen in NYSE (439 advanced, 2556 declined) and Nasdaq Composite (639 advanced, 2666 declined).
The US dollar had strengthen broadly almost against all the major currencies with the US Dollar Index up by +0.59% at the close of yesterday’s U.S. session that saw a sell-off in gold and WTI crude oil. Gold futures had declined by -2.27% overnight to hover right above a medium-term range support at 1874 in place since 12 Aug 2020.
US Federal Reserve Chairman Powell testifies before congressional committees for three consecutive days starting on Tuesday on the CARES Act and to discuss the response to the on-going coronavirus pandemic. A point to note will be Powell’s responses to the broader state of the economy and fiscal stimulus. Also, hear for any “concrete” changes to improve the Fed’s Main Street Lending programme which is aimed at helping small to mid-sized companies and non-profit organisations that have been impacted adversely by the pandemic. Powell had acknowledged the low take-up rate of the programme which bought about US$2 billion in loans which only represents only 0.3% of the total capacity of US$600 billion during the press conference following the Fed’s September policy meeting on last Wednesday.
Nike Q1 fiscal 2021 earnings are due after the close of regular US stock market trading hours today. Nike shares are up nearly 14% for the past three months, outperforming the S&P 500 which is up by around 5%. Analysts polled by FactSet have forecasted earnings per share of US$0.46, down from US$0.86 last year; the consensus for revenue is pegged at US$8.94 billion, down from US$10.66 billion. During the coronavirus’s pandemic, Nike has focused on its direct-to-consumers offerings and invested in its digital channels to counter a slow-down in retail stores’ sales. Hence, market participants will be focusing how effective its digital ecosystem in generating sales.
Tesla will hold its annual shareholder meeting to be followed by the highly anticipated 'Battery Day' event. Expectations are centred on plans to ramp up battery capacity and potential new battery technology to surpass capabilities provided by combustion engines, hence an incentive for drivers to pivot towards battery operated electric vehicles. Technically, Tesla (TSLA)’s medium-term uptrend in place since 18 Mar 2020 low remains intact and it is still trading above its 34-day exponential moving average. Thus, as long as the 386.00 medium-term pivotal support holds, TSLA may see a further push up to retest its current all-time high of 502.49. A clearance above 502.49 opens up scope for 559.30/561.90 next (Fibonacci extension cluster).
Chart of the day: Tesla share price