DAX Stock News Today – stocks have a hard time falling. – Explica .co
It closes a good week for both European and US indices with the exception of the NASDAQ 100 technology index which lost 1.02% despite having recovered ground after the strong paper outflows of the first three days of the week
The S&P 500 again set new all-time highs, rising 1.23% and closing at 4,232 points. The DOW JONES Ind has also reached new all-time highs and was up 2.67% this week, closing at 34,777 points.
Also a good week in Europe, where the Ibex 35 had the highest rise among European indices, 2.77% with a close above 9,000 points at 9,059. The Dax and EURO STOXX 50 have once again approached their historical highs with increases of 1.74% and 1.50% respectively. The CAC 40 has returned to an all-time high this week.
In the bags there are many fears but the reality is that the market has a hard time falling, causing the forecasts of the analysts of the big entities on the maximums to be reached or the market ceilings, one after another one falls short. It is obvious that sometime the market will correct and we will see a ceiling.
Stock markets reached new highs and the only thing we can do is be very attentive to the factors that can cause them to leave a ceiling such as: inflation, increases in bond yields, increases in interest rates or tapering . At the moment they are the factors that worry the most.
We must also look at the geopolitical aspects that can cause sharp drops. Finally, when marking a ceiling there would be the appearance of a black swan that by definition is impossible to foresee.
Tension mounts between China and Taiwan. Industries and tech have problems with the microchip supply chain and between South Korea and Taiwan they account for 83% of the world’s production of processing chips and 70% of memory chips. As for the bottleneck problems in the supply chain, we must add geopolitical tension.
An example is the automotive companies, since each car has more than a hundred microchips and the Philadelphia Semiconductor Index is not able to climb at the moment.
The week began with disturbances in the stock markets due to the statements of last Monday by the Secretary of the Treasury of the United States and former governor of the Federal Reserve Bank (FED), Janet yellen, who said interest rates may have to rise to contain the burgeoning growth in the US economy triggered by liquidity injections of trillions of dollars in stimulus spending into the economy.
Despite Yellen later saying that his words had been taken out of context, the markets had already suffered immediately, especially the technological ones that, among the problems with the supply of microchips, fears of tapering and rate hikes, the excesses in their valuations and the effect of portfolio rotations towards cyclicals and towards commodities, concluded a bad week that could have ended up being unfortunate and dragged down the rest of the indices. Among the Big Tech, the loss of 5.14% in Amazon stood out.
The declarations of Kaplan, chairman of the Federal Reserve Bank of Dallas, who said again Thursday that he wants the Fed to start talking about cutting accommodative policy “sooner rather than later,” and that the economy has improved faster than expected. and citing concerns about excesses and imbalances in the markets. Kaplan said that “We will be much healthier as an economy” once the Fed cuts down on bond purchases. That is, let the tapering begin that when it is announced, we will see a strong negative impact on the stock markets.
Terrible employment data
Friday’s lousy employment data that no analyst expected reflected a very disappointing slowdown in nonfarm payroll growth to 266,000 in April, after it was revised down to 770,000 the previous month. These data show that the recovery is weaker than the consensus thinks. The data takes away the expectations of tapering and acts as a balm for the bags, at least for now.
This bad data produced the collapse of the dollar index which fell 0.81% on the same Friday and triggered the yield on the 10-year bond, although it later gave up almost the entire rise.
The bad employment data removes the expectation of a tapering but, on the contrary, increases the expectation of inflationary tension.
Raw materials and inflation
Rising commodities are fueling higher inflation expectations. Look at the correlation between the evolution of the Blomberg Commodity Index and 5-year inflation expectations.
Inflation expectations (according to Charlie Bilello’s graph) we see that they are at the highest level, at least since 2009.
Investors fear that inflation will not be temporary as the Fed would have us believe and it is thought that it will last much longer than they tell us.
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Commodities rise and rise, wood and copper are at record highs and gold is reactivated.
So far this year, more than 456 billion dollars have entered the stock market. It represents an income of money in the stock market in 4 months higher than what had been in the stock market in more than five years.
The consequence of all this when investing in assets indicates that we must think beyond the sectorial rotation in the stock market and take into account the possibility of investing in other assets such as raw materials.
If even so, one thinks of taking positions in the stock market at this point, it seems not to be very advisable until we witness a correction and in case of doing so, we would have to think about companies that have a positive correlation with inflation.
The evolution of the S&P 500 sectors during the last week, month and since the beginning of the year (YTD) has been the following:
The table shows that the energy, financial and materials sectors are advancing much more strongly than the technology sector whose decline is increasing.
Apart from the restlessness that the NASDAQ 100 caused the first 3 days of the week in the US stocks and that led it to clearly lose its first level of control, in the course of the last two days there was a rebound with a close slightly above of that level.
The falls both in the Nasdaq Composite as in the Philadelphia Semiconductor Index (I-SOX) dragged the NASDAQ 100 due to its bearish divergences, which are currently in the process of adjustment and the “Nasdaq” have already corrected 38.2% of their last short-term bullish segment and the I-SOX a 61.8%.
In turn, the NASDAQ 100 with the rest of the indices was in bullish divergence and the final result was the upward rebound since Thursday.
S&P 500 and DOW JONES Ind on Friday left new all-time highs. The divergences between some indices and others will probably lateralize prices until there is an upward or downward convergence in the group of technological indices that finally takes them off that side.
The upward convergence could lead Wall Street stocks to a strong upward pull and in the same way, a clear bearish convergence could drag Wall Street into the correction that will sooner or later take place.
The problem is that on the sides you never know where they will end up breaking, although the long-term trend continues to be upward.
S&P 500, DOW JONES Ind, NASDAQ 100 and Russell 2000 on daily chart
Europe is improving its situation a lot, with the main European indices, Dax and Euro Stoxx 50 in the area of all-time highs which could be attacked at any moment.
Dax, EURO STOXX 50, CAC 40 and IBEX 35 on daily chart
Banks support the increases, especially in the Ibex 35, but Automotive continues to lag behind and slow the increases:
DAX Stock News Today – stocks have a hard time falling. – Explica .co
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