US markets closed lower overnight, with many blaming President Bidens Tax agenda. He has put on the table doubling the Capital Gains tax to try and target the wealthy. This directly affects Equity traders and Investors and could be just the reason for markets to pull back a little after such strong gains.
All sectors closed in the Red and the VIX index pushed up showing some fear coming back into the market. This is looking more and more likely a small pullback could occur here. The support to watch here is around 4,116 if that level breaks the SP500 is looking bearish back to around 4,000. (A further 3%)
What the US markets do next will depend on the rest of the reporting season, and how Biden’s $2 trillion infrastructure bill plays out. Biden aims to approve a package in the coming months that revamp U.S. roads, bridges, airports, broadband, housing, utilities, and invests in job training along with care for elderly and disabled Americans. Republicans have signalled they could support a scaled-back bill based around transportation, broadband, and water systems.
The typical seasonal pattern for the markets is a rise into May and then ‘Sell in May and Go Away’. This means more times than not May is a bearish month. A correction in May is also common to see, especially if we see a strong move up into the pullback. Timing is always key it could come earlier or later watch the 4116 levels on the SP500.
Locally some of our banks report early May and most Miners and Energy stocks will have quarterly production reporting this month. Expectations are strong for our domestic reporting, with continued recovery expected here as well.
The XJO is expected to edge lower on open this morning following negative leads from the U.S last night. The U.S gave up all their previous day’s gains which means our market is likely to do something similar. If U.S futures move into the green during our session, we may stem the losses in anticipation of a recovery tonight.
Regardless, markets once again are consolidating at the top of the range, although this time with perhaps greater volatility than what would typically be expected. We should hold 7,000 today provided U.S futures don’t spell greater falls during our session.
US shares fell strongly overnight, with the flagship S&P 500 index giving up much of its gains from the prior session. The selling was largely blamed on President Biden’s tax proposals, with proposals around lifting capital gains taxes to add to his proposals on a lift in corporate taxes. Economic data was mixed, with US home sales weaker than expected, though there were less jobless claims than expected. US markets were trading higher before the tax announcements. US company earnings continues to be very positive, with just about every major reporting stock beating consensus expectations again overnight.
Still, US shares are now finding it hard to progress given that they have moved significantly higher recently without any sort of pullback. Just about every major sector closed lower overnight, with Basic Materials, Oil & Gas, and Technology stocks faring the worst.