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Dow, S&P 500 Bears Re-Emerge: Is Another Major Sell-Off On the Way? – DailyFX

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Dow, S&P 500, Nasdaq 100 Price Analysis:

  • The February-March sell-off had reverberations throughout global markets, with the Dow down by as much as 38.5%, the S&P 500 off by as much as 35.9% and the Nasdaq 100 giving back as much as 32.1%.
  • For almost a full month, buyers had control with US equities jumping-higher, aided by some massive government stimulus programs that helped to ease worries.
  • Yesterday’s carnage in oil markets continued for another day and with both the supply and demand sides of the equation remaining worrisome, there may be continued collateral effects as market confidence wanes.

Dow, S&P 500 Push Back Down After a Month of Rebound

It was almost a full month of calm after stocks bottomed around March 22nd; and in the time since the S&P 500 went on to gain as much as 32.6% from the March lows up to the April highs.

The driver for the prior bearish run was fairly obvious: Widespread shutdowns in the effort of flattening the curve and stemming the spread of the novel coronavirus. As this was happening, a few potentially problematic areas began to flare with risk aversion, key of which were US Treasuries and the US Dollar, which gained as much as 8.8% from the March low up to the March high.

It appeared, at the time, that the big fear was that an already highly-leveraged global economy may see collateral effects from the near-certain economic slowdown that would emanate from the coronavirus-related shutdowns, and with the mayhem in oil markets yesterday, that fear may be making a stark reappearance into the equation. And while a portion of yesterday’s mayhem in oil prices can be chalked up to futures market dynamics, as discussed by John Kicklighter, today brought more volatility into the mix as oil prices again sold-off. Our own Martin Essex discussed earlier this morning how that carnage in oil prices has already impacted sentiment; and the response in stocks has thus far been fairly pessimistic.

US stocks continued to trade-lower today, and in the S&P 500, this shows as a push below a rising wedge pattern that had built in the month since those lows were set in March. Today’s bearish push has brought not only a break below the support side of that wedge pattern, but the print of a fresh weekly low and a bit of resistance off of a prior support area showing in the approximate area of 2753, which had helped to hold the lows just last week.

S&P 500 Four-Hour Price Chart

Chart prepared by James Stanley; SPX500 on Tradingview

As discussed in webinars over the past month, amongst major US equity indices, it appears that the Dow Jones Industrial Average has been the laggard; getting hit a bit harder on the way down and then being a bit slower to rally on the way back-up. Resistance in the Dow showed up in a confluent area on the chart, as there are a couple of Fibonacci levels meshing with a trend-line projection that can be found the February 2016 swing low to the December 2018 swing low. For those looking at bearish strategies in US equities, the Dow may continue to hold some element of attraction.

Dow Jones Industrial Average Weekly Price Chart

Dow Jones Weekly Price Chart

Chart prepared by James Stanley; Dow Jones on Tradingview

While both the S&P 500 and the Dow got hit incredibly hard in the February-March sell-off, the Nasdaq 100 held up a bit better. The sell-off wasn’t quite as deep, and the corresponding rally appeared to show in a more clean manner. And a similarly drawn trendline on the Nasdaq 100, taking the 2015 low to the 2018 swing-low held during the sell-off; whereas the comparable trendline on the Dow Jones Industrial Average came in to show as resistance. For bullish US equity scenarios, the Nasdaq 100 may continue to be a bit more attractive than both the Dow Jones Industrial Average and the S&P 500 given these recent dynamics.

Nasdaq 100 Weekly Price Chart

Nasdaq 100 Weekly Price Chart

Chart prepared by James Stanley; Nasdaq 100 on Tradingview

— Written by James Stanley, Strategist for DailyFX.com

Contact and follow James on Twitter: @JStanleyFX

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Unexpectedly Strong Jobs Report Sends Oil Soaring – OilPrice.com

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U.S. West Texas Intermediate crude oil futures are trading at their highest levels of the week on Friday and inside the price gap created on March 9 when the market opened sharply lower, officially starting the coronavirus-related plunge. The price action strongly suggests the buying is getting stronger especially if traders fill the gap.

The market was initially supported after a report said OPEC and its allies led by Russia would meet on Saturday to discuss extending record oil production cuts and to approve a new approach that aims to force laggards such as Iraq and Nigeria to comply better with the existing curbs.

A second surge in the market occurred following the release of a much better-than-expected U.S. Non-Farm Payrolls report. This surprisingly strong report is a sign that the economy is improving much faster than previously expected, meaning that demand will pick up at a much faster pace than currently estimated.

OPEC+ Wants an Extension and Better Compliance

Saturday’s meetings would start with talks between members of the Organization of the Petroleum Exporting Countries and be followed by a gathering of the OPEC+ group, an OPEC+ source said, after Algerian and Russian media reported the meetings, Reuters reported.

Two OPEC+ sources said Saudi Arabia and Russia had agreed to extend the deeper cuts until the end of July but they said Riyadh was also pushing to extend them until the end of August.

Three OPEC sources said…

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Canada postpones critical 5G spectrum auction by six months – Yahoo Canada Finance

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Canada's Minister of Innovation, Science and Industry Navdeep Bains speaks during a meeting of the special committee on the COVID-19 outbreak, as efforts continue to help slow the spread of the coronavirus disease (COVID-19), in the House of Commons on Parliament Hill in Ottawa, Ontario, Canada May 20, 2020. REUTERS/Blair Gable
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Due to COVID-19, Innovation, Science, and Economic Development Minister Navdeep Bains has postponed the critical 3500MHz spectrum auction for 5G by six months to June 2021.” data-reactid=”23″>Due to COVID-19, Innovation, Science, and Economic Development Minister Navdeep Bains has postponed the critical 3500MHz spectrum auction for 5G by six months to June 2021.

A press release from his department indicated that postponing the auction will allow telecom carriers focus on “providing essential services to Canadians” during the pandemic. 

The new date is set for June 15, 2021. 

In general, 5G operates over traditional and new cell radio frequency bands that include the low- (sub-1GHz such as 700MHz), mid- (1.6GHz, around 3.5-3.8GHz), and millimetre-wave (mmWave, such as 28GHz) ranges. 

The 3,500MHz band is critical specifically in cities where thousands of small cells will be deployed in order to be used for applications like self-driving cars and many consumer applications.

The sum of opening bid prices for the auction is $558 million. Last year’s 600MHz spectrum auction raised $3.57 billion. 

“Canada’s telecommunications service providers are doing their part in this difficult time, providing essential services to keep Canadians connected as we face the realities of the COVID-19 pandemic together,” Bains said in the release. 

“A number of providers have raised concerns, and the government is implementing measures to address them. The government will continue to reach out to telecommunications service providers—and to the private sector more broadly—to understand their challenges and support them to ensure that Canadians have access to high-quality networks and broad coverage at low prices.”

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Recently, Telus and Bell announced plans to partner with Nokia and Ericsson as a 5G supplier. Rogers is partnered with Ericsson to provide 5G services.” data-reactid=”31″>Recently, Telus and Bell announced plans to partner with Nokia and Ericsson as a 5G supplier. Rogers is partnered with Ericsson to provide 5G services.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Additionally, Bains indicated that the first tracking report on the 25 per cent reduction in wireless service prices over the next two years will be available online in July 2020.” data-reactid=”32″>Additionally, Bains indicated that the first tracking report on the 25 per cent reduction in wireless service prices over the next two years will be available online in July 2020.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Download the Yahoo Finance app, available for&nbsp;Apple&nbsp;and&nbsp;Android&nbsp;and sign up for the&nbsp;Yahoo Finance Canada Weekly Brief.&nbsp;&nbsp;” data-reactid=”33″>Download the Yahoo Finance app, available for Apple and Android and sign up for the Yahoo Finance Canada Weekly Brief.  

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At midday: North American markets jump on better-than-expected jobs data – The Globe and Mail

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An unexpected jump in U.S. employment sent world equities and oil surging on hopes that the global economy has started to recover from the coronavirus pandemic, pulling investors out of perceived safe havens like government bonds and gold. Canada’s TSX gained 2.1%, with investors also cheering much better than expected jobs numbers on this side of the border.

U.S. nonfarm payrolls rose by 2.509 million jobs last month after a record plunge of 20.687 million in April. Economists polled by Reuters had forecast the unemployment rate jumping to 19.8% in May and payrolls falling by 8 million jobs.

“The numbers are a huge surprise to the upside,” said Michael Arone, chief investment strategist at State Street Global Advisors. “It has confirmed what many folks were suggesting: that the effects on the labor market from the pandemic were temporary and that when the economy reopened and the infection rates started to diminish, that these jobs would come back.”

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MSCI’s gauge of stocks across the globe gained 2.04%. The index is now down 4.5% for the year to date and trading at its highest level since early March, before the U.S. economy went into lockdown in an effort to slow the spread of the novel coronavirus.

On Wall Street, the Dow Jones Industrial Average rose 829.16 points, or 3.15%, to 27,110.98, the S&P 500 gained 81.58 points, or 2.62%, to 3,193.93 and the Nasdaq Composite added 198.27 points, or 2.06%, to 9,814.08. The Nasdaq breached its all-time closing high reached in February but pared its gains to end the session a hair’s breadth below it. The broad S&P 500 is now down about 1% for the year to date.

The S&P/TSX Composite Index rose 326.20 points to 15,854.07. Gold stocks were lower, but otherwise gains were widespread across sectors, with energy rallying 7.9%. Financials rose just over 3%.

Canada added 290,000 jobs in May after two months of brutal layoffs, a surprise turn for the job market as provinces have only recently begun to ease lockdown restrictions. Analysts had been expecting half a million job losses during the month. Despite the gain, the unemployment rate rose to 13.7 per cent, the highest since comparable data became available in 1976, as more people started seeking jobs.

Equity gains were widespread before the surprise jobs reports. MSCI’s broadest index of Asia-Pacific shares outside of Japan rose 0.9%, reversing early losses to stay near a 12-week high.

The index is up about 7.6% this week, on track for its best weekly showing since December 2011.

Emerging market stocks were up 0.7% and also on course for their best week since December 2011.

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Hopes for a swift economic recovery sank U.S. government bonds, which had reached historic highs on fears that the pandemic would erode consumer demand. Benchmark 10-year notes last fell 20/32 in price to yield 0.8851%, from 0.82% late on Thursday.

“The sell-off in the bond market in the last few weeks seems to be justified,” said Subadra Rajappa, head of U.S. rates strategy at Societe Generale. “This is a tremendously positive step in the right direction, and probably points to a faster recovery, at least in the jobs market, than people had expected.”

Bond investors will get further insight into the likely direction of the economy when the U.S. Federal Reserve holds its regular two-day policy meeting next week.

Europe has now clawed back two-thirds of the losses incurred amid the coronavirus pandemic and Bank of America analysts said on Friday they expect European stocks to rise another 10% by the end of September on expectations of a pickup in business activity.

Set for a third straight week of gains, the euro rose to $1.1380, its highest level since March 10 and was on course for a weekly jump of 2.5%.

The dollar index made a tepid recovery, rising 0.08% to 96.84, but remained on track for its third consecutive week of losses and close to its lowest in nearly three months.

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Hopes for an economic recovery sent oil prices surging. U.S. crude recently rose 4.97% to $39.27 per barrel and Brent was at $42.14, up 5.38% on the day.

Read more: Stocks that saw action Friday – and why

Reuters

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