Wall Street robust despite geopolitical tensions, DJIA holds above key 61.8% support


 

  • DJIA, added 102 points, or 0.4% to 26,107.
  • S&P 500 index put up 12 points, or 0.4% to reach 2,892.
  • The Nasdaq Composite index added 44 points, or 0.6% to 7,837.

Wall Street's benchmarks performed robustly on Thursday, despite the heightened angst over trade wars and geopolitics in general. Ironically, the Iran risk helped to lift Wall Street on the back of a rise in part lead by shares of energy companies. The Dow Jones Industrial Average, DJIA, added 102 points, or 0.4% to 26,107, while the S&P 500 index put up 12 points, or 0.4% to reach 2,892. The Nasdaq Composite index added 44 points, or 0.6% to 7,837.

Additionally, the recent inflation data released earlier in the week showed prices falling which has added to the speculation that the Federal Reserve is on course to lower interest rates in the coming months - However, 2Y US Treasury yields rallied by another 5bps as the curve bull-steepened in response to rising geopolitical tensions.

US data

Analysts at ANZ Bank offered a summary of the US data released overnight as follows:

  • A fall in US import prices to lowest level in five months supports the case for the Federal Reserve to cut interest rates this year. Import prices for May were down 0.3% and April data was revised down to +0.1%. Prices of goods imported from China were down 0.1% in May, indicating the tariffs are impacting volumes but not the import price. The tariff cost is primarily being absorbed by the US, where profit margins are being hit harder than the consumer wallet.
  • US jobless numbers lifted in the week ended June 8, defying market expectations. The four week moving average of claims increased by 2500 last week, indicating a slight softening in the labour market.
     

Looking ahead, data will be front and center ahead of the weekend, with markets likely to react to both retail sales and IP. "Strength in both indicators could allow markets to pencil out some rate cut odds, but further weakness could continue to drive rates lower," analysts at TD Securities argued. 

DJIA levels

For the DJIA, the technical outlook stays sideways while above the key 61.8% Fibo retracement level of April to June swing highs and lows. Bulls need to get through the 78.6% mark in the 26200s with a confluence of the 12th April gap the prior day. Bears will seek a break below the  20-D EMA that located just below the 50% Fibo of the recent daily range guarding a run towards the 200 D EMA and then the 25200 level, as being around the 11th March swing lows. On a drop below 25000, bears can look towards 24500s and then 50% of the upside run made at the end of Dec at 24150.

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