Forexlive Americas FX news wrap: A Category 4 storm slams US stocks

Author: Greg Michalowski | Category: News

Forex news for NY trading on October 10th 2018.

Other markets wrap:

  • Spot gold rose $4.29 or 0.36% at $1194.09
  • WTI crude oil is down -$2.50 or -3.23%% at $72.55.  The price is heading lower into the close as the private API data of weekly inventories is showing a surprise build of 9750K.  The fall in crude came despite hurricane Michael which closed some production in the Gulf of Mexico.
US yields are ending lower as late day buying finally pushed yields lower. 

The big news was the Category 4 storm that hit the US stock market today.  

On a day that hurricane Michael made landfall in Florida as a Category 4 storm packing 155 MPH winds, the US major indices were hit with a -3-4% gust of it's own.  Higher yields, trade tensions, and outright panic liquidation sent shudders through the investment community.

Look at these closing numbers:
  • The S&P fell -94.66 points or -3.29% at 2785. The index fell below its 100 day MA at 2822.37. The 200 day MA is ahead at 2765.51. The price has not trading below the 200 day MA since May 3rd, 2017.  It is 20 points away.
  • The Nasdaq fell -315.96 points or -4.08% at 7422.05. The low reached 7420.56. The index fell below the 200 day MA for the first time since July 2016 at the 7499 level, and also below a trend line at 7475.  It will take a move above those levels now to potentially turn the beat around
  • The Dow fell -831 points or -3.15% at 25598. The low reached 25593. The index fell below its 50 day MA at 25995. The 100 day MA comes in at 25526.34.  The Dow was last below the 100 day MA on July 9th, 2018.  
The chart below shows how all major indices in Europe and the US closed at lows. PS Europe shares has some catch up when they open tomorrow too.


     

Ouch!

Earning season is just getting started with JP Morgan, Citigroup, Wells Fargo and PNC Financial scheduled to report on Friday, with Bank of America and Schwab on tap for Monday.  Other big names like IBM, Netflix, Goldman, Morgan Stanley, J&J, American Express, Paypal, Travelers, P&G, Intuitive Surgical and Honeywell are all scheduled to announce next week as well.   Buckle your seat belts up. The market hurricane winds might stay around for a while. 

The tumbling stock markets impact on other markets had a delayed reaction.

  • Bond yields, were clinging to modest gains until late in the session when they turned negative on a flight to safety bid, and are ending down -3-5 bps. It took a while.
  • Gold is up $4-$5 bucks but still remains below $1200 (at $1194). No real flight into the safety of the precious metal
In the forex market, despite some large losses into the NY afternoon, the risk-off flows out of the AUD and NZD really did not get going until the last few hours into the stock market close.   Finally, the CAD, AUD and NZD tumbled lower (on risk-off).  They are ending the session as the weakest. The JPY is ending as the strongest as the Pavlovian reaction is to hit the JPY crosses. The USD is mixed with gains vs the risk-off currencies (AUD, NZD and CAD), and declines vs the JPY, GBP, EUR and CHF.  

Looking at ranges for the major pairs and crosses, the USDJPY, USDCHF, USDCAD, AUDUS and NZDUSD are ending at the days extremes (see chart below).  The JPY crosses are also going out on their back (and at lows). 


The question going forward is "What will tomorrow bring?"   Will the sun come out or will the gusts of the storm today, continue to knock everything down in its path?

You can expect Asian shares to get hit. You can expect the European shares to sell off as well. That should lead to a lower US opening as well.  

At the start of the day, the CPI will be released. The PPI data today did not show anything alarming with regard to prices, but who knows?  

The expected reaction is sell off at the opening. Look bad and bounce back hard.  

The problem is this hurricane might not follow the path that we all expect.  

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