USD/JPY is in freefall / US Stock Ends in Red, Unable to Tackle Made in China Bears
Wall Street posted losses on Monday despite positive durable orders goods in June, as the heavy punch from China drove stock indices lower.
New York - Once again US markets were unable to escape from the clutch of global issues as the early morning Chinese slump, on the back of renewed problems in the world's second biggest economy, drove equity markets across the globe south.
"The fear factor of China is very much alive in the market. That's nearing us to some technical support levels," Rockwell Global Capital chief market economist Peter Cardillo said. "Slow growth out of China just complicates the oil picture."
The Standard & Poor's 500 index closed with a loss of 0.57% at 2,067.79 points.
Among the other indices, the Dow Jones Industrial gave up 0.72% to 17,441.99 points, while the Nasdaq Composite ended 0.96% lower at 5,039.78 points.
Macro news
When looking at the less volatile gauge excluding transportation, the macro indicator reached 0.8% in June, after -0.1% seen in May.
However, the main focus remains on Wednesday's conclusion of the Federal Open Market Committee meeting, which is not expected to bring any changes to monetary policy, but Federal Reserve Chair Yellen might suggest some further hints as to when the main rate will be hiked. The September meeting is still in play.
Furthermore, US GDP for the second quarter is due on Thursday and should post growth of 2.5%, returning to strong figures after Q1's dismal -0.2%.
Corporate corner
Financial house UBS reported upbeat earnings results during the June quarter, boosting its profit by 53% year-to-year. The company unveiled the figures in advance, responding to ''misleading information'' which was seen in several newspapers over the weekend. Shares of the company declined 1.55% to $21.98.
Chip maker Qualcomm saw its shares rise 0.68% to $62.04 as Morgan Stanley upgraded its shares to ''overweight''. The investment bank believed that the market saw Qualcomm's situation as too sluggish, while the corporation reduced significantly its costs according to the latest news.
The parent company of Standard and Poor's - McGraw Hill Financial - informed about the acquisition of SNL Financial for $2.225 billion in cash as SNL specializes in data and analytics for the financial industry. McGraw shares lost 3.14% to trade at 102.27.
Electronic maker Royal Philips announced a 13% leap in net profit during the second quarter, as the Amsterdam-based corporation partly benefited from the weaker euro along with better-than-expected overall sales in the major markets. Shares of the company soared 3.82% to $27.32 on Monday.
Technical analysis
The index confirmed our bearish view from last week, held the 2,112 resistance and was sold-off heavily in the previous days. The price broke below the 2,077 support on the way down, which activated more stop losses and it continued further to the downside.
On the four-hour chart, the index is nearing oversold levels, although there is still potential for one leg lower, targeting the 2,035 area as previous swing lows. The momentum, along with MACD, are in favor of bears, all pointing to a further decline. As long as the price trades below the 2,077 horizontal resistance, the trend is bearish.
The shorter term one-hour time frame is in oversold territory, with momentum and MACD diverging from the price action. All three indicators are suggesting some upside is possible, targeting the strong resistance at 2,077. The daily outlook is therefore bullish, with 2,077 levels watched as profit potential. On the other hand, clearing the support area at 2,055, which is a daily low, should confirm the strength of the bearish trend and the price should then retrace to the mentioned 2,035 area. USD/JPY is in freefall on Monday, which is stocks negative and calls for cautious trading.
