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Investors were attracted by the rise in bond yields and dropped stocks.
US stocks down led by technology stocks, Apple is down 4.1% on the day.
The three main US indices closed lower on the last day of the week. The S&P 500, the Dow Jones and the Nasdaq all closed below their 50-period simple moving average. The S&P 500 Index dropped 0.90% to 2,670 while the Dow Jones Industrial Average DJIA lost 0.80% to 24,463 and the Nasdaq Composite Index fell 1.3% to 7,146.
The decline was led by technology shares, especially Apple which dropped 4.1% on Friday on the back of comments from Morgan Stanley bank which said that Apple’s iPhone sales for the June quarter will disappoint the market. Ten of the eleven S&P 500 main sectors closed in the red. The technology sector was down 1.5% while the consumer staples sector was down 1.68% on the day.
Collaborating to the drop in stocks is the rise of the US bond yields. Investors decided to rotate their assets and turned to bonds. The 10-year Treasury Note jumped to 2.96% close to 2014 highs. Behind the move are the stronger US economy and increasing US inflation.
“I am calling this a momentum trade because it has largely been driven by commodity prices. As we have learned over the last few years, those baskets can rise and fall at any time as certain short-term factors cause spikes in prices, then settle back down into a more ‘normal’ trading range.” commented Kevin Giddis, head of fixed income at Raymond James.
S&P500 Index Daily chart
The main trend is bullish but the market is currently having a pullback. Resistances are seen at 2,718.75 and 2800 swing highs while support lies at 2,650 swing low (early March) and at 2,551.75 cyclical low.
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Trumps‘s tweet criticizing OPEC cuts sends crude oil lower but then black gold recovers losses quickly.
Longer-term fundamentals for oil are still well in place for oil.
Crude oil WTI is trading at around $68.38 per barrel virtually unchanged as the commodity traded mainly sideways on the last day of the week but still at levels not seen since late 2014.
Earlier in the day, Trump tweeted that he was not happy with current oil prices. “Looks like OPEC is at it again. With record amounts of Oil all over the place, including the fully loaded ships at sea, Oil prices are artificially Very High! No good and will not be accepted!” says Trump by Tweeter. Oil ticked lower on the tweet but then prices quickly recovered.
The OPEC and Russia decided to cut production in January 2017 in order to support the prices of oil.
Oil prices are higher for many reasons: diplomatic tensions with Russia, the Iranian deal that needs to be renewed on May 12, tightening supply led by OPEC and Russia, a global demand for oil which is steady and a decreasing Venezuelan oil production.
Khalid al-Falih, Saudi oil minister, said that OPEC has no intention to decrease the cuts for the time being and that it would be premature to discuss it at the next meeting in June. He added that the global economy could put up with higher prices and that oil demand would persist regardless of higher prices.
Crude oil WTI: levels to watch
The trend is bullish. Support is seen at 67.76 swing high and at 67.00 figure, while resistance is seen at 68.91 supply level and 69.56 high of the year.
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Profit taking and Presidential election polls send the Peso sharply lower.
USD/MXN rises almost 3% in 2 days.
The Mexican peso ended the week as the worst performer among the most-traded currencies. It dropped sharply during the last two days and the slide still has room to go.
The USD/MXN pair reached the lowest level since September at the beginning of the week under 18.00. The Peso failed to hold under 18.00 and weakened modestly. The currency started to decline sharply on Thursday and on Friday peaked at 18.68, the highest level since March 23. It was the biggest 2-day gain in months.
The Peso was affected by profit-taking after rising from March to mid-April and it also turned lower following the release of new polls showing that candidate Andres Manuel Lopez Obrador’s has increased to more than 20 points ahead of the presidential elections to be held July 1. Also, a stronger US dollar pushed the pair to the upside.
Despite the recent decline, the Peso continues to among the best performers of 2018. It rallied earlier on optimism about NAFTA and higher crude oil prices. After recent moves, the outlook clouded for the Mexican peso
Banxico sure looking
After the sharp and quick depreciation, eyes would star turning to the Bank of Mexico. Will it implement more actions to curb Peso’s weakness? Is another rate hike possible? Much of what happens, will depend on what happens next week with USD/MXN.
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