STATE OF THE MARKETS

Stocks under pressure as inflation cools. US stocks jumped higher on Tuesday but closed below open as short covering pushed major averages lower on close. Nasdaq (+1.01%), Russell (+0.76%), S&P (+0.73%) and Dow (+0.30%) all edged higher than Monday but mostly investors flocked to bond’s safety, sending yields lower across the board. The shorter 2Y yield dropped to 4.21% while the 10Y benchmark fell to 3.50% as the Dollar index weakened further below the 104 handle.

In the commodity markets, crude oil climbed for the second day, closing above the $75.20/bl barrier after EIA reports of potential rally in 2023 on Russian sanctions as well as higher than expected demand. Cooling inflation sent gold higher, closing above $1,810.60/oz, as New York closed. Elsewhere, iron ore edged lower to around $109.25/tn as recession fears still plague the markets.

In the FX space, short term traders were quick to bid the oversold Yen, Aussie and Swiss while sending Euro, Sterling and Loonie to the back burner. King Dollar was sold-off across the board as investors expect softer hikes on Wednesday.

On Wednesday, markets expected to remain volatile as investors continue to position their portfolio ahead of the FOMC meeting, where the Feds is expected to raise 50 points of rates to 4.50%. Earnings releases to watch includes Lennar Corp (LEN), Trip Dot Com (TCOM), Nordson Corp (NDSN), Weber (WEBR) and REV Group (REVG) as well as the latest figures in the US mortgage applications, import/export prices and the much awaited FOMC decision at 2:00PM ET. EIA petroleum status will be in the spotlight for energy traders.

OUR PICK – No New Pick

We stay on the sideline for now. Investors are not that bullish ahead of the FOMC meeting as evident in the stocks and bonds markets. Stocks jumped but closed lower than open, bonds yields fell as demand rose, though VIX dropped lower. We decided to stay on the sideline for now as we see choppy markets ahead.

Disclaimer: This article is for general information purpose only. It is not an investment advice or a solicitation to buy or sell any securities. Opinions expressed are of the authors and not necessarily of MFM Securities Limited or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.