(17 September 2020)DAILY MARKET BRIEF 1:US Equities Mostly Bearish

US stock indices took different routes on Wednesday but bears dominated the market at the end of the session. The S&P 500 ended lower despite the fact that the Fed hinted it would maintain interest rates close to zero for a long period. The benchmark index was dragged down by tech stocks.

Shortly after the Fed released its statement, the S&P 500 extended gains while the Dow surged over 1%. Investors focused on the central bank’s commitment to keeping the rate low until inflation moderately exceeds its 2% target “for some time.” Economic projections anticipate that the rates will remain on hold until no earlier than 2023.

However, the tech sector spoiled the party, dropping 1.6% on the day and dragging the index down. Thus, the S&P 500 ended 0.46% lower. Nasdaq lost 1.25%, while the Dow secured a modest gain of 0.13%. The tech sector experienced massive selloff in the previous two weeks, as the market was moved by institutional investors that had exposure to tech stocks through options and other derivatives.

For some analysts, the comments by Fed Chairman Jerome Powell were more dovish than expected, so the bearish mood is somewhat surprising. Still, the Fed failed to provide further details on stimulus, which might have caused frustration among investors. Powell concluded that the US economic activity remained below pre-COVID levels and that the path for recovery from the coronavirus crisis “remains highly uncertain.”

Yesterday, the US Commerce Department said that retail sales had increased by 0.6% in August, which is less than the expected 1%. In July, the indicator was downwardly revised to reflect a 0.9% increase.

In Asia, stocks are also bearish, as the sentiment around the US tech selloff prevailed over the Fed’s accommodative stance.

At the time of writing, China’s Shanghai Composite is down 0.76% while the Shenzhen Component has declined by 0.80%. The tensions between the US and China are reflected in the attempted deal between Oracle and TikTok parent ByteDance. US President Donald Trump raised concerns over the partnership.

Hong Kong’s Hang Seng is down 1.63%.

Japan’s Nikkei 225 has lost 0.68%. Yoshihide Suga was elected as new prime minister in a parliamentary vote held yesterday. He promised to continue Shinzo Abe’s Abenomics policy. Just recently, the Bank of Japan kept its policy steady.

South Korea’s KOSPI has tumbled 1.19%.

In Australia, the benchmark ASX 200 has dropped by 1.09%. Data released earlier today showed that the unemployment rate fell last month to 6.8% from July’s 7.5%, which is a good sign for the labor market. Also, employment rose 110,000 y/y against the expected decline of 35,000.

It is unlikely that Europe will go against the general trend, as futures are flashing red at the moment, suggesting a bearish open for most major indices.