10 of 11 S&P 500 sectors are higher: tech leads, communication services lower.
US dollar index is making new highs again.
On Tuesday, the S&P 500 slipped below 4200, and the VIX broke the previous day’s high. In addition, the technology sector dragged down the major indices by more than 2%. This results in a 29% year-to-date loss for the NYSE FANG+ index.
The choppy overnight session saw futures slightly higher. The choppy trading continued during the regular session. Initial attempts to move higher met with selling, which forced us to retest yesterday’s low, which held, and we have since returned to session highs.
The earnings of an index/sector are the driving force and have a major impact on it. Inflation, growth problems relating to central bank containment policies, and the consequences of China’s quarantine and the Ukraine conflict remain our key concerns for macroeconomic situations.
There have been reports that some of the lockdown measures may be eased for China, and there have also been more calls for political support. The Shanghai Composite is up 2.5% overnight, but it’s still down over 4% WTD because of conflict in Ukraine headlines circulating yesterday and today. Yesterday’s report about gas outages in Poland seemed to add to the alarm, but this was later confirmed-the gas continued to flow despite claims otherwise, which brought relief to many people across Europe who heard about these rumors earlier today through social media or news updates like CNN International News Wire or Reuters Top News Alerts
The US Dollar Index has been making new highs all year, with the bullish momentum picking up last week. In April, it rose by 5%. This started when Yen weakened but later spread to other currencies (EUR/Pound/Chinese Yuan).
Overnight, the Bank of Japan will make its monetary policy decision. The outcome is closely monitored because it could affect international bond markets and foreign exchange rates. Some analysts believe that changes in yield differentials are driving many of these flows, but this has economic consequences. For example, yesterday US bond yields declined after a couple of days with downward movement; however, today, they slightly recovered for a short period before descending on worries about trade tensions between China and the United States among other factors.
This morning’s only sector that is down in the S&P 500 is communication services. The weakness comes from Alphabet’s postal revenue, Meta’s outperformance tonight after missing last quarter and other cable-related promotions also lagging behind information technology which has been leading for a while now.