Wall Street fails to extend rally as trade concerns reemerge

Trump administration reportedly plans to pull the U.S. out of the postal treaty.
Trade-sensitive stocks lead losses on Wednesday.
WTI settles below $70 after EIA report to weigh on energy.

Eren Sengezer FXStreet

Major equity indexes failed to carry its recovery move into a second straight day on Wednesday as latest headlines surrounding the U.S. - China trade conflict weighed on the market sentiment.

Citing senior Trump administration officials, the NY Times reported that the White House was planning to withdraw from the 144-year old postal treaty that allowed Chinese companies to ship small packages to the U.S. at a discounted rate. Hurt by this report, the trade-sensitive S&P 500 Materials and Industrials indexes fell 0.8% and 0.68% respectively.

Moreover, today's data from the U.S. Energy Information Administration showed a much larger buildup in crude oil stocks in the U.S. than expected and dragged the price of the barrel of West Texas Intermediate below $70 for the first time in a month to force the S&P 500 Energy Index to end the day 0.7% lower.

On the other hand, in its September meeting minutes, the FOMC highlighted that some members of the committee saw the need to continue to raise rates even after they reach the so-called neutral rate. The rate-related S&P 500 Financials Index closed the day 0.9% higher. "Call it what you will, normalization, hawkish, counter-cyclical, the FOMC minutes underlined the Fed's determination keep its rate policy intact through 2019. The question the governors can't answer is has the economy become addicted to low rates?" FXStreet Senior Analyst Joseph Trevisani questioned.

The Dow Jones Industrial Average lost 89.64 points, or 0.35%, to 25,737.59, the S&P 500 dropped 0.85 points, or 0.03%, to 2,809.07 and the Nasdaq Composite fell 2.8, or 0.04%, to 7,642.69.

DJIA technical outlook by FXStreet Chief Analyst Valeria Bednarik

Technically, and according to the daily chart the Dow held above its 100 DMA, but technical indicators have lost upward strength well into negative territory and after correcting oversold conditions, maintaining the risk skewed to the downside.

In the 4 hours chart, however, the intraday retracement met buyers around a bullish 20 SMA, while technical indicators hover directionless well into positive ground. A steeper decline seems likely only on a break below 25,480, the daily low.

Support levels: 25,733 - 25,680 - 25,629.

Resistance levels: 25,815 - 25,871 - 25,940.

Author

Eren Sengezer

FXStreet

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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