US DOLLAR TALKING POINTS:
The US Dollar continues to hang near resistance at 96.04 after another earlier-morning test of this level, amounting to the fourth such instance already in October. This resistance comes from the 50% marker of the 2017-2018 bearish move in the currency, and this has proven a stubborn area for buyers. While this resistance test has been taking place, another interesting theme has re-appeared and that’s a revival of risk aversion in equities.
Caterpillar shares are trading lower despite beating both top and bottom lines earlier today; but given the warnings from the company about rising material costs, coupled with 3M cutting forward-looking forecasts, investors are becoming more concerned with the dual threats in the US economy of both rising tariffs and rising interest rates. Meanwhile, matters across the Atlantic remain worrisome, as the potential for a stand-off between Brussels and Rome remains over the Italian budget, and markets may be soon seeing a no-confidence vote around British PM, Theresa May.
US EQUITIES RE-TEST LOWS IN THE DOW AND S&P
Sellers have come back into the equity space, and ahead of the US open, both the Dow Jones and the S&P 500 are re-testing the October lows that were set a couple of weeks ago.
DOW JONES DAILY PRICE CHART: TESTING BELOW TREND-LINE, FIBONACCI SUPPORT
Chart prepared by James Stanley
WALL OF WORRY
This morning’s moves are being driven, at least in-part, by earnings announcements at the industrial bellwether of Caterpillar along with 3M. Caterpillar cited rising material costs despite their earnings beat (both top and bottom), while 3M cut forward-looking forecasts. This speaks to the growing fear that the US economy may have already peaked, and given the dueling forces of rising tariffs and rising interest rates, US companies may have a tougher road ahead.
Outside of the US – the horizon grows a bit more dim as there are challenges in both Europe and the UK that are set to remain in the spotlight this week.
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