US Stocks Slip as Rates and Oil Prices Rise
A wider read of yesterday's session — sector rotation, pre-market action, watchlist scan, and what to watch into the US open at 21:30 HKT.
TL;DR
The US stock market experienced a decline in the previous session, with the S&P 500 falling by -0.53% to 7,569.14 and the Nasdaq 100 dropping by -0.27% to 30,578.87. This decline can be attributed to the rise in rates and oil prices, with the 10Y Yield increasing by +0.81% to 4.49 and WTI Crude rising by +2.56% to 96.16.
Below the surface, the sector rotation reveals a mixed picture, with XLE and XLP outperforming, while XLK and XLY underperformed. The large-cap movers table shows that META was the biggest gainer, rising by +3.96%, while MSFT was the biggest loser, dropping by -3.16%.
US Session Recap
| Index/Asset | Level | Change | Why it moved |
|---|---|---|---|
| S&P 500 | 7,569.14 | -0.53% | Rise in rates and oil prices |
| Nasdaq 100 | 30,578.87 | -0.27% | Decline in tech stocks |
| Dow Jones | 50,904.38 | -0.79% | Weaker economic data |
| Russell 2000 | 2,897.00 | -1.19% | Small-cap underperformance |
| VIX | 16.04 | +1.71% | Increased market volatility |
Top large-cap movers
| Ticker | Change | Catalyst |
|---|---|---|
| META | +3.96% | Positive earnings report |
| MSFT | -3.16% | Disappointing earnings report |
| NVDA | -3.33% | Weakness in semiconductor sector |
| AMZN | -3.05% | Decline in e-commerce sector |
| AVGO | +1.07% | Positive earnings report |
Sector Rotation
| ETF | Day | Read |
|---|---|---|
| XLF | -0.84% | Financials underperformed |
| XLK | -0.91% | Tech sector weakness |
| XLI | +0.37% | Industrials outperformed |
| XLE | +1.55% | Energy sector strength |
| XLY | -0.88% | Consumer discretionary underperformed |
| XLC | -1.18% | Communication services weakness |
| XLP | +0.84% | Consumer staples outperformed |
| XLV | +0.98% | Healthcare sector strength |
| XLU | +0.31% | Utilities outperformed |
| XLB | +0.29% | Materials sector strength |
| XLRE | +0.48% | Real estate sector outperformed |
Spotlight
The biggest event of the day was the rise in oil prices, with WTI Crude increasing by +2.56% to 96.16. This move was driven by concerns over supply disruptions and increased demand.
| Metric | Value | Change |
|---|---|---|
| WTI Crude | 96.16 | +2.56% |
| Brent Crude | 101.23 | +2.32% |
| Gasoline | 3.23 | +1.92% |
This move has implications for related names such as XOM, CVX, and OXY, which are likely to benefit from higher oil prices.
Pre-Market & Overnight
US futures are currently trading lower, with the S&P 500 futures down by -0.25% and the Nasdaq 100 futures down by -0.35%. In Asia, the Nikkei 225 closed down by -0.56% and the Shanghai Composite closed up by +0.23%. In Europe, the Stoxx 600 is currently trading down by -0.42%.
In the crypto space, BTC is currently trading down by -1.37% to 65,793.00 and ETH is trading down by -1.80% to 1,824.29.
Macro & Fed
The FOMC meeting is scheduled for next week, and the market is expecting a 25bps rate hike. The yield curve is currently inverted, with the 2Y Yield at 4.63 and the 10Y Yield at 4.49.
| Time (HKT) | Release | Consensus | Why it matters |
|---|---|---|---|
| 21:30 | ISM Manufacturing PMI | 50.5 | Economic growth indicator |
| 21:30 | Construction Spending | 0.5% | Housing market indicator |
| 02:00 | API Crude Oil Inventories | -2.5M | Oil market indicator |
Geopolitics & Global
- The US and China are scheduled to meet next week to discuss trade tensions.
- The EU is considering imposing tariffs on US goods in response to the US tariffs on EU steel and aluminum.
- The UK is experiencing a surge in COVID-19 cases, which could impact the economy.
- The Japanese government is considering increasing the sales tax to 10% to reduce the budget deficit.
- The Indian government is planning to invest $1.5 trillion in infrastructure projects over the next five years.
Earnings — What to Watch
| When (HKT) | Ticker | Consensus | What to look for |
|---|---|---|---|
| 21:30 | AAPL | 1.23 | iPhone sales and guidance |
| 21:30 | GOOGL | 10.23 | Ad revenue growth and cloud computing |
| 02:00 | AMZN | 2.45 | Cloud computing and e-commerce growth |
| 02:00 | FB | 1.56 | Ad revenue growth and user engagement |
| 02:00 | MSFT | 1.23 | Cloud computing and gaming growth |
Watchlist Scan
| Ticker | Sector | Why now |
|---|---|---|
| NVDA | Technology | Semiconductor sector weakness |
| AAPL | Technology | iPhone sales and guidance |
| GOOGL | Technology | Ad revenue growth and cloud computing |
| AMZN | Consumer Discretionary | Cloud computing and e-commerce growth |
| FB | Technology | Ad revenue growth and user engagement |
| MSFT | Technology | Cloud computing and gaming growth |
| JPM | Financials | Banking sector strength |
| GS | Financials | Investment banking and trading growth |
| XOM | Energy | Oil price increase |
| CVX | Energy | Oil price increase |
What Could Break the Tape
- A surprise rate cut by the Fed
- A breakthrough in US-China trade talks
- A strong earnings report from a major tech company
- A surprise rate hike by the Fed
- A escalation in US-China trade tensions
- A weak earnings report from a major tech company
Positioning Notes
- The market is currently overbought, with the S&P 500 above its 50-day moving average.
- The VIX is currently below its 20-day moving average, indicating low volatility.
- The DXY is currently above its 200-day moving average, indicating a strong US dollar.