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Wall Street closes modestly higher boosted by energy & financials

  • Rising US T-bond yields lift financials on Wednesday.
  • WTI breaks above $76 to help energy shares gain traction.
  • DJIA, yet again, closes at new record high.

Major equity indexes in the U.S. started the day on a positive note as markets cheered the upbeat macroeconomic data releases from the U.S. Although they retraced some of their early gains, they were able to close the day in the positive territory.

The monthly report released by the ADP on Wednesday showed that the private sector 230K new employees in September to beat the analysts' estimate of 185K. Furthermore, the PMI reports published by the IHS Markit and the ISM both showed that the business activity in the service sector continued to expand at a robust pace. The improved sentiment on the data pushed the US T-bond yields higher and fueled the S&P 500 Financials Index, which closed the day 0.82% higher.

Commenting on the bond yields' performance, "The U.S. 10-year traded as high as 3.18 percent on Wednesday, the highest in seven years, spurred by the surging U.S. economy and a determined Fed. Treasury rates are entering the range of consequence, where higher interest costs will begin to have an economic impact," FXStreet Senior Analyst Joseph Trevisani said. 

Furthermore, after staying calm for the last couple of days, crude oil extended its rally with the barrel of West Texas Intermediate refreshing its highest level in nearly four years at $76.87. The commodity-sensitive S%P 500 Energy Index added 0.82% on the day.

The Dow Jones Industrial Average added 53.13 points, or 0.2%, to 26,827.07, the S&P 500 gained 1.59 points, or 0.05%, to 2,925.02 and the Nasdaq Composite rose 24.23 points, or 0.3%, to 8,023.78.

DJIA technical outlook via FXStreet Chief Analyst Valeria Bednarik

The Dow´s daily chart shows that the index shed half of its daily gains, anyway finishing at record ground after hitting 26,950. The mentioned chart shows that the upward potential is still strong, as the 20 DMA has accelerated its advance, but still holds some 400 points below the current level, as technical indicators extend their advances, despite being in overbought readings.

For the shorter term, and according to the 4 hours chart, the risk is also skewed to the upside, as the index has detached from a firmly bullish 20 SMA, while the larger ones also advance below this last. Technical indicators in this last time frame have eased within positive levels, with the RSI now losing downward strength and around 63, rather reflecting the intraday downward correction than anticipating further slides ahead.

Support levels: 26,791 - 26,738 - 26,679.

Resistance levels: 26,885 - 26,950 - 26,700.

Author

Eren Sengezer

As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.

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