US futures traded flat in the overnight trading session, as the Federal Reserve (Fed) hawks came back in charge following strong job additions, and solid wages growth in the latest US jobs data.
The US 2-year yield peaked above the 1.30% for the first time since the beginning of the pandemic. The short end of the US yield curve is rebounding fast, but we are still at the pre-pandemic levels meaning that there is more room for a further yield flattening in the coming weeks. Therefore, the risks are still touted to the downside for equity markets.
Week ahead
This week the attention will shift from corporate earnings to macroeconomic data, more specifically to latest US consumer price index that could have advanced to 7.3% in the US in January. Fear of a stronger inflation will likely keep the investor appetite limited until the data release. Thursday’s US CPI figure is expected to have advanced to a fresh 40-year high of 7.3% in January, as energy prices kept souring during the first month of the year, and they show no signs of easing. The barrel of US crude is now consolidating gains above the $92 mark.
The S&P00 closed last week above its 200-DMA, while Nasdaq gained more than 2% during the week, although we are still below the 200-DMA, and with a 50-DMA which is now plunging toward the 200-DMA as a sign that a death cross formation will soon be what we will be discussing.
Overall
Chinese stocks rallied as Chinese investors returned from a week-long Lunar New Year break, and they had some gains to catch up with. Plus, the better-than-expected Caixin services PMI offered a roaring start to the Tiger Year, but the rest of Asia looks much less promising with stock in Japan, Hong Kong and Australia trading in the red due to the stronger hawkish Fed expectations.
The US dollar rebounded from its 100-DMA, Bitcoin finally cleared the $40K resistance.
The Bitcoin relief comes with a slight delay to the rebound in stocks, but gains could remain limited as the worries that initially sent the cryptocurrency valuations lower are still in play and should be watched closely.
