E-mini S&P 500 Futures (March): Settled at 3878, up 4.50
E-mini Nasdaq-100 Futures (March): Settled at 13,192, down 32.25
U.S. benchmarks rebounded from yesterday’s early bloodbath and the S&P finished positive. In fact, most sectors, led by energy and communication services, gained ground. It was the behemoth tech sector that dragged on sentiment, losing 0.25%. However, the Nasdaq lost as much as 3.5% upon testing our rare major 4-star support at 12,727-12,767 and, given that the snapback has only pared this week’s losses in half, markets are still vulnerable until they close above major 3-star resistances.
Fed Chair Jerome Powell began his Congressional testimony yesterday just following the opening bell, with U.S. benchmarks at their worst. He reassured that policy would remain accommodative and that the Fed is committed to using their full range of tools. Powell added that inflation is soft and price pressures aren’t a threat.
Furthermore, the uptick in rates is due to an improved economic outlook and there’s strong demand for the short end. For now, we believe this rhetoric works; the Fed is willingly allowing the curve to steepen. As we noted here yesterday, investors will have to decide between expensive tech stocks and risk-free return.
Economic activity has surged in recent months and will continue to do so within the melting pot of added fiscal stimulus, warming temperatures, a precipitously falling Covid-19 count, and the vaccine rollout. There will soon come a time when short-term rates improve along with the belly and longer-end, creating added headwinds. Fed Chair Powell continues his testimony today.
Asian markets weren’t immune to the selling as China’s Shanghai Composite lost 1.99% today and Hong Kong’s Hang Seng lost 2.99%. President Biden is expected to sign an executive order to review U.S. dependence on China; this narrative, along with inflation and regulatory concerns in Hong Kong, are weighing on the region.
The overnight low in the S&P came just ahead of Europe’s open and a better read on QoQ GDP for Germany in Q4 at +0.3% versus an expected +0.1% has helped lift sentiment.
In the U.S., Fed Chair Powell began his second day on Capitol Hill at 9:00 a.m. CT, EIA inventory data came due at 9:30 a.m. CT, and Fed Governors Lael Brainard and Richard Clarida speak at 9:30 a.m. and noon CT.
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