North American News
US major indices close lower for the 2nd consecutive day
- After run up last week, stocks are on pace for declines this week
The major US stock indices all moved lower for the 2nd consecutive day this week. The shortened week due to the Memorial Day holiday on Monday on pace for declines with 2 days left to go. Much will depend on Friday’s US jobs day, but for now, the sellers are trying to take more control.
Having said that, the S&P index, and the Dow industrial average both traded intra-day below their respective 200 hour moving averages, but are closing above those levels after a US afternoon rebound. For the S&P index, the 200 hour moving average comes in at 4086.19. The closing price is at 4101.24.
The Dow industrial average’s 200 hour moving average comes in at 32671.12. It’s closing price is up at 32813.22.
A look at the final numbers are showing:
- Dow industrial average -176.91 points or -0.54% at 32813.22
- S&P index -30.92 points or -0.75% at 4101.24
- NASDAQ index -86.92 points or -0.72% at 11994.47
- Russell 2000-9.218 points or -0.49% at 1854.82
Within the S&P index 10 of the 11 sectors were lower.
- Financials fell -1.7%.
- Healthcare was down -1.42%.
- Consumer stable’s fell -1.32%
- Real estate fell -1.1%
- Materials fell -1.03%
The only sector with a gain was energy which rose 1.76%
US ISM manufacturing PMI for May 56.1 vs. 54.5 estimate
- US ISM manufacturing PMI for May 2022
- Last month 55.4
- ISM manufacturing PMI 56.1 vs. 54.5 estimate
- Prices paid 82.2 vs. 83.0 estimate. Last month 84.6
- Employment 49.6 vs. 50.9 last month
- New orders 55.1 vs. 53.5 last month
- Production 54.2 vs. 53.6 last month
- Supplier deliveries 65.7 vs. 67.2 last month
- Inventories 55.9 vs. 51.6 last month
- Customers inventories 32.7 vs. 37.1 last month
- Backlog of orders 58.7 vs. 56.0 last month
- Exports 52.9 vs. 52.7 last month
- Imports 48.7 vs. 51.4 last month
April US construction spending +0.2% vs +0.5% expected
- April US construction spending data
- Prior was +0.1%
- Private spending +0.5% m/m
- Public spending -0.7%
Commodities
Gold Price Forecast: XAU/USD rebounds to $1850 despite higher US yields
- Stocks reverse in Wall Street, Dow Jones down by more than 1%.
- US economic data surpass expectations.
- XAU/USD faces resistance around the $1850 area.
Gold prices bounced from multi-day lows under $1830 to the $1850 area after the beginning of the American session and despite higher US yields. XAU/USD holds near daily highs even as Wall Street extends losses and as the US dollar strengthens.
Earlier on Wednesday gold prices rose sharply finding resistance under $1850. After a pullback to $1838 following the release of better-than-expected US economic, prices turned again to the upside. As of writing, XAU/USD stands at $1849, fresh daily high.
The positive momentum for gold remains intact even despite the negative context for the metal. The US 10-year yield stands at weekly highs at 2.93%. The US dollar trades at daily highs across the board. The DXY is up by 0.80% above 102.55.
The positive US ISM Manufacturing report triggered a decline in equity prices as the figures reinforced expectations of aggressive monetary policy tightening from the Federal Reserve.
Silver is rising by 1.45%, erasing most of Tuesday’s losses. XAG/USD bottomed at $21.44 during the European session and recently peaked at $21.97.
Wednesday’s rally in metal could turn into a reversal if gold manages to break and hold above $1850 and silver does the same with $22.00.
Silver Price Forecast: XAG/USD bounces off weekly lows and aims to re-test the $22.00 figure
- Silver cuts some of its weekly losses but stays losing 1%.
- Risk-aversion underpins the non-yielding metal, alongside the US Dollar
- Positive US economic data keep the greenback tilted to the upside.
- Fed policymakers see 50 bps rate hikes in June and July.
- Silver Price Forecast (XAG/USD): Tilted downwards, though a break above $22.44, would open the door towards the 50-DMA.
Silver (XAG/USD) snaps two days of losses and rallies above 1.50% in the day amidst a risk-off trading session, courtesy of increasing worries that restrictive monetary policies would threaten to bring the US economy into a recession. At $21.86, XAG/USD is bouncing from weekly lows at around $21.43 as XAG bulls prepare to re-test the $22.00 mark.
The white metal prices are rallying, despite higher US Treasury yields. The rate of the US 10-year T-note is advancing almost ten bps and sits at 2.949%, failing to undermine precious metals. Nevertheless, global equities fall, attributed to higher global bond yields.
Sentiment remains dismal courtesy of the increase of hostilities in the Ukraine-Russia war. Russia’s military advanced in an industrial city, according to Reuters. Meanwhile, the US is preparing to send additional military equipment to Ukraine.
In the meantime, the greenback continues its recovery during the New York session. The US Dollar Index, a measurement of the buck’s value against a basket of six currencies, climbs 0.77%, and sits at 102.557, a level last seen on May 23.
Data-wise, a busy US economic docket featured May’s US ISM Manufacturing PMI, JOLTs openings, and some Fed speakers. The ISM Manufacturing PMI came at 56.1 vs. 55.4 in April, while expectations were near 54.5. Meanwhile, the US JOLTs report showed that openings in April dropped from 11.9 million in March to 11.4 million, a relief for employers who struggle to contract or keep workers.
The St. Louis Fed President James Bullard said that “The current US macroeconomic situation is straining the Fed’s credibility with respect to its inflation target.” Furthermore, he added that the US labor markets and the US economy remain robust, but Russia’s invasion of Ukraine and a sharp slowdown in China means risk remains “substantial.”
Earlier in the day, the San Francisco Fed President, Mary Daly, said that she sees a couple of 50 bps rate hikes and emphasized the Fed’s need to get expeditiously to neutral. She added that the central bank needs to be prepared to do whatever it takes to tame inflation, though it needs to be ready to stop hiking rates if needed.
Silver Price Forecast (XAG/USD): Technical outlook
XAG/USD remains tilted to the downside, further confirmed by the daily moving averages (DMAs), residing above the spot price. If XAG/USD bulls would like to regain control, they would need a break above May’s 27 high at $22.46. Once cleared, that could pave the way for a test of the 50-DMA at $23.38. Otherwise, XAG/USD would remain vulnerable to further selling pressure, as sellers would look for rallies to enter at a better price. In that case, the XAG/USD first support would be June 1 low at $21.43. Break below would expose May’s 19 swing low at $21.28, followed by the YTD low at $20.45.
Crude oil futures settle at $115.26
- Up $0.59 or 0.51%
The price of crude oil futures are settling at $115.26 . That is up or %. The low for the day reached 114.58. The low for the day extended to 117.87.
Shanghai lifted their lockdown which is a positive for oil. The Russian oil ban in the EU at the end of the year is also positive.
Technically the price did move higher earlier, but is has given up gains and is settling below the 100 hour MA at $115.60. The price has tried to break that MA over the last two days, but momentum has stalled. Nevertheless, keep an eye on the MA for short term bias clues. Stay below is more bearish. Move above is more bullish.
EU News
European equity close: UK stocks drop 1% ahead of the holiday
- Closing changes for the main European bourses
- UK FTSE 100 -1.0%
- Stoxx 600 -1.0%
- German DAX -0.3%
- French CAC -0.8%
- Italy MIB -0.9%
- Spain IBEX -0.7%
Other News
US Pres. Biden: Cannot instantly reduce cost of gasoline
Joe Biden is laser-focused on knocking down sky-high gasoline prices, but he has a limited influence to do that and the US President said he cannot take immediate action to bring them down. Biden officials have been openly pleading with Big Oil to pump more despite his campaign efforts to address climate change. Yet, Biden has been draining oil from the SPR at a record pace, urging US oil and gas companies to pump more oil and trying to persuade OPEC to add supply.
The oil markets were paying attention to Biden’s plans in March when he announced a record-setting release of 180 million barrels of oil from the SPR following the disruptions caused by Russia’s invasion of Ukraine. However, the relief proved to be temporary and the price of oil is back on the rise.
Cryptocurrency News
Bitcoin falls through $30,000 in another blow to the bulls
- Bitcoin down 6.25% on the day
The rally in bitcoin is stopped in its tracks.
Three weeks of consolidation in bitcoin was capped by what looked like a break to the upside on Monday but it’s come nearly completely undone today with bitcoin falling $1800 to $29,940.
A nice consolidation/pennant formation was followed by an unusually long period of sideways movement, particularly given the volatility in other global markets.
Eventually, bitcoin seemed to catch a tailwind from a strong rebound in stocks, although belatedly. What’s concerning is that even with equities only down moderately (S&P 500 down 0.8% today) bitcoin has nearly given it all back.
A completely retracement would be to $29,400.
Perhaps the bulls can focus on the ‘retest of the break’ philosophy but that works better after a sideways channel.
What’s equally concerning for non-crypto traders is the bitcoin has been a good leading indicator of global market sentiment. This drop highlights the likelihood that the latest bounce is a bear market bounce rather than a bottom.
Central banks are tuning into stablecoin risks
- The collapse of TerraUSD is a catalyst
The spectacular demise of the TerraUSD stablecoin along with Luna has opened a window for stablecoin regulation. It appears as though central banks are coming.
A plan released from the Bank of England yesterday said collapsed stablecoin issuers would be put into special administration under BOE control, similar to banks.
A Bloomberg column today urges more regulation.
Today the Fed’s Williams is edging into the same debate.
- Digital revolution in payments and money could have implications for central banking
- Role of central banks will remain to supply liquidity and stability but digital currencies could change implementation
- It’s ‘critical’ the Fed understand how digital technologies influence the financial system and policy implementation