Wall Street's momentum comes to a halt

Wall Street's benchmarks have given up the bull run, unable to make it a sixth consecutive session in the green and printing record highs after the other. 

We had a string of positive data from the US economy, but the dollar, yields and stocks all slipped back. Stock markets were bemused with Trump's presser where he announced that tax reforms would have to wait until a replacement of the Affordable Care Act was auctioned proposed for as soon as next month.  

The S&P 500 index SPX, -0.09% was off by 8 points, or 0.3%, to 2,342, retreating from an intraday high set shortly after the market opened at 2,351. Stocks have been rallying since Trump won the elections as markets expected his administration to stoke the fire some more with fiscal spending and tax reforms within a pro-business stance  - some of that hope was reignited last week when Trump “massive” tax plan. Such initiatives were also supported by Yellen when she testified at the start of this week. However, markets can't run on this hot air forever and without follow through or action to come for a while, as such, these hights might not be sustainable as the levels become fragile. We have seen a small correction and momentum fade. 

The S&P 500 index was down by a fractional 8 points, or 0.3%, to 2,342 while the Dow Jones Industrial Average was dropping back by 31 points, or 0.2%, to close at 20,581. Meanwhile, the Nasdaq Composite was lower by 18 points, or 0.3%, at 5,802. The US 10yr treasury yields dropped from 2.49% to 2.44% and the 2yr yields also fell from 1.253% to 1.20%.

Fed fund futures slipped 1bp-4bp, and analysts at Westpac noted that the April contract now trading at 0.72%, which said implies around a 40% chance of a rate hike in March). That is something that markets do not seem to be factoring in yet - rate hikes may be good for the banking sector on the front end of the scale but are a serious risk to the bubble popping eventually as the Fed slowly starts to take the punch bowel away.  Meanwhile, the US dollar index shed around 0.6%, another down day. 

 

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