Overnight the US markets stalled again near the all-time highs as the FED left monetary policy where it was and will continue to stay very accommodative to help stimulate the economy. Bond didn’t move much but the US dollar pulled lower.
Mixed reporting saw investors switch from Microsoft into Google. This week there is plenty more reporting to come. 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.
Energy stock pushed higher overnight as crude gained, after a lower then expected inventory read. We would expect Energy and Financials to lead the move higher in local markets today. Materials in Australia are at an interesting level flirting with all time highs. Iron Ore has already broken into all time highs and Copper is tested all time highs earlier this week. BHP, RIO and FMG still relatively cheap considering expected earnings results in August.
April so far has been a strong month with the S&P500 moving up around 8% since late March. The XJO has gained 5%. 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 4,116 levels on the S&P500.
Australian Outlook
The XJO is expected to edge slightly higher on open this morning following flat leads from the U.S overnight. Our open should have us test 7100 today, though considering the U.S was unable to push through their resistance and all-time high, it is unlikely we break our key level. The exception is if U.S futures push hard into the green today – at the moment they are fairly flat.
We continue to consolidate at the top of the range – a fairly typical response for our market following a strong run. Investors will be wondering how much gas is left in the tank before we see the inevitable pull back. In the way of fundamental news, things remain positive. From a technical perspective, the trend remains strong, and supports are holding. All indicators point to continued bullish movement.
US Markets
US shares closed slightly lower overnight, with prices continuing to drift along just below their all-time highs. The big news overnight was the Federal Reserve, who held short-term interest rates at near zero and indicated that there were no plans to raise rates or end quantitative easing any time soon. US shares did flirt with all-time highs at points during the session and even exceeded the 4,200 mark, before pulling back.
After the market closed, there were strong earnings reports from Facebook and Apple that helped push futures markets higher. Oil & Gas stocks were the strongest performers overnight, while Basic Materials, Financials, and Telecoms also rose. Technology, Healthcare, and Utilities stocks closed lower.
Tim Michaelides is the Head Trader at Emerald Financial Group.
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