The various US markets took it on the chin today with the broader stock indices closing sharply lower on the day (led by the Nasdaq index with its 2nd worst trading day of the year).
The NASDAQ index fell -2.43%. That was a worse day since February 21 when the index fell -2.51%. The index closed at 12821.21. The low price reached 12804.20. On the downside, the 38.2% retracement on the move up from the October 2022 low comes in at 12781.90. Just below that level is its 200-day moving average at 12767.16. Move below those levels in the new trading day would increase the bearish bias from a technical perspective.
Meanwhile, the S&P index also fell sharply by -1.43%, its worst day since falling -1.47% on September 26. Recall that yesterday, the price moved back above and closed above its 200-day moving average of 4238.41. However, with the sharp decline today, the index is not only back below that moving average but also trading at its lowest level since June 1. The index is also testing its 38.2% retracement of the move up from the October 13 flow
looking at the US debt market, bond prices continued to slump (higher yields). Looking at the yield curve:
- 2-year yield rose 5.4 basis points to 5.1248%
- 5-year yield rose 9.1 basis points to 4.914%
- 10-year yield rose 11.1 basis points to 4.950%
- 30 year yield rose 11.8 basis points to 5.0814%
The US treasury auctioned off $52 billion of five-year notes today with a large tail of 1.9 basis points vs the WI level. The average tail over the last 6 auctions was -0.4 basis points. The Bid to cover data was also much lower than the 6-month average at 2.36X versus 2.91X average. The international demand was the main culprit with demand well below its six-month average at 61.5% versus the 6 month average of 68.9%. That’s a big decline suggesting international demand may not be as robust going forward. All things equal was international demand leads to higher rates.
In the forex market, the USD followed the yields higher and is ending the day as the strongest of the major currencies. The AUD is ending as the weakest of the majors.
The AUDUSD moved higher in the Asian session after higher CPI data. However, selling in the European session pushed the pair into negative territory, the 100/200 hour MAs were broken at 06334 and is closing near lows for the day, just above 0.6300 level.
The Bank of Canada Rates unchanged at 5.0%. Bank of Canada Governor Macklem and Deputy Rogers discussed various aspects of the economy and monetary policy. They acknowledged that inflation has been higher than expected, with increased inflation risks, and demand pressures eased more quickly than anticipated. They maintained the policy rate to allow monetary policy time to cool the economy, expressing concerns about higher energy prices and persistent underlying inflation affecting progress. They expected oil prices to remain higher than previously assumed. Macklem noted that higher rates were effective, but interest rate hikes were contingent on clear downward momentum in core inflation. Rogers highlighted the challenges in Canada’s housing market and the importance of monitoring the mortgage-renewal cycle. Despite government spending, undue inflation pressure was not evident. Coordination between governments and central banks was seen as essential for managing inflation. Macklem ruled out discussing reductions in the overnight rate at this time and noted increased risks of oil prices rising further.
The USDCAD moved higher (lower CAD), and extended to the low of a swing area near 1.3807 up to 1.38614. The upper extreme represents the high for 2023. The high price today reached 1.3809.
Economic data in the US sought new-home sales surprise to the upside. New-home sales on an annualized basis reached 759,000 much higher than the 680,000 expected, and the 676,000 last month.
It was not all bad today. The US House of Representatives finally was able to elect a new Speaker of the House. Mike Johnson received the full support of the Republican Party. Johnson although a strong conservative, had not pissed off the more moderate Republicans (like some of his nominated predecessors).
After the close IBM, Meta and ServiceNow beat expectations.
- Meta shares are trading up $10.31 or 3.41% at $309.84. However, for the day, Meta shares were down $13.02. So the rise is erasing some of the declines for the day.
- ServiceNow shares closed at $530.17 and are trading up $21.72 or 4.10% at $551.89.
- IBM is trading up $2.97 or 2.17% at $140.05.