Yields and Powell Testimony in Focus


  • Dow Jones, S&P 500 and Nasdaq 100 closed +0.32%, +0.70%, and +1.71% higher respectively
  • 10-year Treasury yield retreated slightly to 1.693% from an intraday high of 1.725%
  • Fed Chair Jerome Powell’s and Treasury Secretary Janet Yellen’s House testimony will be in focus

of clients are net long.

of clients are net short.

Change in Longs Shorts OI
Daily -8% 14% 4%
Weekly 8% -6% -1%

Tech Gains, Volatility, Yields, Powell, Asia-Pacific at Open:

Wall Street equities closed broadly higher on Monday as technology sector rebounded for a second day as the closely monitored 10-year Treasury yield dipped below the 1.70% mark from a 14-month high. Surging longer-ended yields appeared to be the primary factor weighing on the performance of technology companies lately, as the latter offer relatively low dividend yields and are of higher valuations. The Nasdaq 100 index climbed 1.70%, led by Intel (+2.93%), Apple (+2.83%) NVIDIA (+2.65%) and Microsoft (+2.45%).

Fed Chair Jerome Powell said in a testimony prepared for delivery in a hearing that “The recovery has progressed more quickly than generally expected and looks to be strengthening. But the recovery is far from complete… the Fed will continue to provide the economy the support that it needs for as long as it takes.” That said, Powell is likely to reiterate his dovish stance in a joint appearance with Treasury Secretary Janet Yellen in a testimony before the House Financial Services Committee on Tuesday.

With a strong recovery on the horizon and the Fed’s patient stance on inflation, the VIX volatility index extended declines to a pre-Covid level of 18.9, suggesting that the stock market has probably returned to a status of complacency. Separately, the US Treasury is holding auctions for 2-year note Tuesday, 5-year note on Wednesday and 7-year note on Thursday.

VIX – Volatility Index

Chart by TradingView

Asia-Pacific markets look set to open stronger on Tuesday following a decent US lead. Futures across Japan, mainland China, Hong Kong, South Korea, Taiwan and Singapore are pointing to trade mildly higher amid improved sentiment and falling longer-dated Treasury yields.

Australia’s ASX 200 index opened up by 0.27%, led by utilities (1.10%), health care (+1.08%) and real estate (+1.04%) sectors, while energy (-0.62%) and consumer discretionary (-0.48%) lagged behind.

Japan’s Nikkei 225 index opened modestly higher after falling over 2% on Monday. The index was hammered by concerns over the chip supply to the auto industry after Renesas Electronics –a major automotive semiconductor- partially suspended production at a key plant following a fire. The incident also led to a broad retracement in auto-related shares.

Looking ahead, UK employment changes and a slew of Fed official speeches are in focus amid a relatively quiet day in terms of macro events. Find out more from theDailyFX calendar.

Looking back to Monday’s close, 7 out of 11 S&P 500 sectors ended higher, with 55.6% of the index’s constituents closing in the green. Information technology (+1.93%), consumer staples (+1.16%) and real estate (+1.12%) were among the best performers, while financials (-1.30%) and energy (-1.01%) lagged behind.

S&P 500 Sector Performance 22-03-2021

Nasdaq 100, Nikkei 225, ASX 200 Forecast: Yields and Powell Testimony in Focus

Source: Bloomberg, DailyFX

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Nasdaq 100 Index Technical Analysis

The Nasdaq 100 index has broken above the “Descending Channel” with upward momentum. The index is about to form an inverse “Head and Shoulders” pattern, which is usually perceived as a trend reversing indicator and may open the door for further upside potential. An immediate resistance level can be found at 13,257 – the neckline of the pattern. Breaking above this line would probably intensify near-term buying power and expose the next resistance level of 13,400 – the 76.4% Fibonacci retracement.

Nasdaq 100 Index 4-Hour Chart

Nasdaq 100, Nikkei 225, ASX 200 Forecast: Yields and Powell Testimony in Focus

Nikkei 225 Index Technical Analysis:

The Nikkei 225 index has likely formed a “Double Top” chart pattern at the 161.8% Fibonacci extension level of 30,455 and has retreated since. The 20-day SMA is about to cross below the 50-day line, potentially forming a bearish crossover. The MACD indicator is trending lower alongside prices, underpinning bearish momentum.

Nikkei 225 IndexDaily Chart

Nasdaq 100, Nikkei 225, ASX 200 Forecast: Yields and Powell Testimony in Focus

Chart by TradingView

ASX 200 Index Technical Analysis:

The ASX 200 index bounced off the floor of the “Ascending Channel” and surged above the 50-day SMA line of 6,730 – an immediate resistance. The index appears to have entered a range-bound condition between 6,660 and 6,860 since early March, waiting for fresh catalyst for a clearer direction. The MACD indicator is trending below the neutral midpoint, showing that downward momentum is prevailing.

ASX 200 Index – Daily Chart

Nasdaq 100, Nikkei 225, ASX 200 Forecast: Yields and Powell Testimony in Focus

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— Written by Margaret Yang, Strategist for DailyFX.com

To contact Margaret, use the Comments section below or @margaretyjy on Twitter

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