Long-term bond yields over the past few weeks has been rising strongly, adding fear to the market that inflation and rising interest rates are coming. The market has been weak on the back of this. But overnight FED chair Jerome Powell relieved some of the concerns about higher interest rates and inflation. This saw the DOW and S&P500 reverse to close in the green.
Tech and Discretionary stocks continue to be a drag whilst recovery stocks continue to be favored at this stage. There is a clear theme in the market and that is strong buying in recovery stocks. Many of these companies are Value stocks which make up the majority of the top 200 in Australia. So, think Financials, Miners, Energy, and anything that will benefit from infrastructure spending. We also saw Travel stocks catch a bid yesterday as the Vaccine starts to be available locally.
There is a lot of talk about controls at airports to identify people that have been vaccinated. Talks of e-vaccination certificates are good news for travel companies as we may see more ease of travel. This will have investors talking about travel companies more and more this week.
Biden’s go big Fiscal stimulus will likely be passed in the coming weeks, and the FED will remain extremely accommodative for a long time. So even though US markets seem overdone here, with so much cheap money around it is unlikely to see a sizable correction any time soon. Instead, we are seeing a rotation out of overbought growth stocks and into value.
The XJO is expected to edge lower on open following a tumultuous night in the U.S. With U.S futures sitting slightly in the dream, the market once again isn’t giving much of a signal this morning as to how the day may pan out.
Uncertainty in markets remain as displayed in the U.S last night. Sentiment remains positive but inflation worries are underpinning moves. Powell coming to the rescue last night has helped keep optimism which hopefully is reflected in our market during our session today.
Yesterday’s move higher was expected as our move down was exaggerated and we bounced from a very key level of support. We continue to track sideways in a broader sense, but hopefully Powell, and potentially stimulus will be the catalyst to help us push higher in the short term.
US shares closed marginally higher overnight, after a whippy session that saw the S&P 500 break its five-day losing streak. Prices were firmly in the red at one point overnight, but testimony from Fed Chair Jerome Powell to Congress incited buying in the market.
Mr Powell indicated that the Fed’s support for markets would continue for a while yet. There was also an economic report showing that US consumer confidence was stronger than expected and rising. Oil & gas stocks were again the strongest performers overnight, while most other sectors closed slightly higher. Technology and utilities stocks were the only sectors to sell down.