Bulls take a breather, dollar drops
Last Friday, the S&P 500 rallied over 3% but now things have cooled a little. The slight tick higher in bond yields seems to be applying pressure to stocks. A few hours ago, the US durable goods report was released, and it showed growth of 0.7%, easily topping the 0.1% forecast. Pending home sales was a well-received update too as it showed growth of 0.7%, which was major turnaround from the -4% seen in April. This dampens the mild worries the US could be on track for a recession, but the solid reports nudged up the 10-year yield, which is applying pressure to stocks. The S&P 500 is flickering between positive and negative territory, and the NASDAQ 100 in lower.
Russia is in focus as G7 leaders are discussing new ways of potentially applying pressure to the country’s economy. A ban on gold imports and a price cap on oil are being touted as possible measures to take against Russia. Even though geopolitics is back in the news, it is not having the same impact it once had. Concerns about slower global growth, high inflation and the very real possibility of more interest rate hikes are still in the ether. Traders are wondering whether today’s pullback in US indices is a correction amid the recent bullish streak, or whether it is the beginning of a new wave of selling.
There appears to be some disconnect between the US dollar and the 10-year yield, as the former is down 0.4%, even though the bond yield is marginally higher. The US dollar index has fallen to its lowest mark in over one-week. As a result of the move in the greenback, GBP/USD and EUR/USD are moderately higher, and USD/CAD is in the red, but the firmer oil price is also a factor in that move.
Industrial metals are largely higher today following a very bearish run last week. Worries about a cooling in global demand has hurt the commodities. Copper is up over 1% today but keep in mind it tumbled to a 16-month low on Friday, so in the grand scheme of things, the upward move it not overly impressive.