Over optimism unwinding was the theme 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%), the sector's biggest component stock.
Financials were not spared either, 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 an 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 second US fiscal stimulus package approved before the US 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).
The US dollar was almost unchanged against the major currencies yesterday, the USD Dollar Index shed -0.14% and GBP/USD rose as high as 128 pips before it pared back gains to close at 1.3011 in yesterday’s US session. The rally in GBP/USD was Brexit news-driven, after the UK indicated that it will not abandon the ongoing negotiations with EU officials, despite PM Boris Johnson’s 15 October. The next important date on the timeline will be this Friday, 16 October, when the UK prime minister is likely to 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 the 24 September low (see chart of the day).