Wake Up Wall Street (SPY) (QQQ): Powell unpivots and markets unwind
Here is what you need to know on Monday, August 29:
Equity markets begin the week on the back foot after a selling spree on Friday. Jackson put us all in a hole as Powell stepped up the hawkish narrative. Yields have now been marked up accordingly, but there may be more portfolio rebalancing ahead in the weeks to come.
Already Europe has opened lower, and US equity futures are looking at another 1% loss at a minimum on the open. The dollar remains in a kingpin position naturally after such a hawkish tilt, and that will also be a weight on US equities. This point has been overlooked in the last earnings quarter. We have had numerous earnings boasting of gains on a constant currency basis, but since then are currencies ever constant? US companies especially will be hit hard by the rising dollar. At least though it does somewhat offset energy inflation.
Many market participants pointed to the VIX remaining relatively subdued during Friday's rout, but fear not. It is up another few points with more to come this morning. Yields in Europe are all higher, and US yields are also moving higher this morning. In the past week, fed funds futures for December 2023 have priced in an additional 20 basis points of hikes, and Powell made it very clear he sees rates higher for longer. When you add in the growing hawkishness from the ECB, it seems risk assets are in for a tough few months ahead.
The dollar index is now at 108.90, while oil is higher at $93.50 on the back of Libya's problems and more talk of supply cuts from OPEC. Bitcoin suffered a tough weekend as it fell below $20,000 and is stable there this morning. Gold is at $1,728.
European markets are lower: Eurostoxx -0.4%, FTSE -0.6% and Dax -1%.
US futures also lower: S&P -0.9%, Dow -0.8% and Nasdaq -1.1%.
Wall Street top news (QQQ) (SPY)
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Netflix (NFLX) to charge $7 to $9 for ad service -Reuters.
Astra Zeneca (AZN) diabetes drug Farxiga sees good data.
Catalent (CTLT) drops on revenue missing estiamtes.
Pinduoduo (PDD) is up on strong earnings.
Moderna (MRNA) got Swiss approval for its new vaccine, which contains an omicron version.
Tellurian (TELL) down on the new issue.
Upgrades and downgrades
Source: WSJ.com
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Author
Ivan Brian
FXStreet
Ivan Brian started his career with AIB Bank in corporate finance and then worked for seven years at Baxter. He started as a macro analyst before becoming Head of Research and then CFO.
