Dow Jones Rebounds on Stimulus Hopes, Nikkei 225 May Lead Asia Lower
DOW JONES, NIKKEI 225 INDEX OUTLOOK:
- Dow Jones rebounded amid reignited US stimulus hopes, weaker-than-expected jobs report
- The US Dollar climbed to one week high. US retail sales, Michigan consumer sentiment in focus
- Japan’s Nikkei 225 index edged lower, Singapore’s NODX fell short of expectations.
Dow Jones Index Outlook:
The Dow Jones Industrial Average (Dow) had a ‘V-shaped’ rebound on Thursday and closed marginally lower at 28,494, fueled by renewed hopes for a relief aid that is critical to the recovery of the world’s largest economy. House Speaker Nancy Pelosi said that the stimulus package won’t wait until January, while President Trump said he’d go ahead with a US$ 1.8 trillion package, according to Bloomberg. This contrasted a dismal picture painted by Treasury Secretary Steven Mnuchin, who made it clear that the chances of a deal before the election remained thin earlier this week.
Market sentiment, however, was fragile as a second viral wave seemed to have ramped up in parts of the world, leading to partial lockdowns and travel restrictions. US initial jobless claims unexpectedly tiled up last week, showing early signs of weakness in the employment market. The actual reading came in at 898k, versus a 825k forecast. The US dollar climbed to a one week high of 93.8, pointing to resurging demand for safety.
Weekly US Jobless Claims – Week October 10th
Source: Bloomberg, DailyFX
Corporate earnings continued to deliver more positive surprises, which may help to cushion the downside of stock markets’ consolidation. All of the five S&P 500 constituents, which released their Q3 results on Thursday, beat analysts’ forecasts (table below). Honeywell and Bank of New York Mellon are among the major US companies to release earnings on Friday, alongside US retail sales and the University of Michigan consumer confidence data.
Sector-wise, 6 out of 9 Dow Jones sectors closed in the green, with more than half of the indexe’s constituent companies rising on Thursday. Energy (+0.77%), consumer discretionary (+0.59%) and consumer staples (+0.53%) were leading, whereas information technology (-0.89%) and healthcare (-0.29%) were lagging.
Dow Jones Index Sector Performance 15-10-2020
Source: Bloomberg, DailyFX
Technically, the Dow appeared to have entered into a consolidative period after coming off a six-week high. Fibonacci retracement drawings (chart below) suggest that immediate support levels can be found at 28,390 (23.6%) and then 28,040 (38.2%). The 20-Day and 50-Day Simple Moving Average (SMA) lines can also be viewed as dynamic support levels.
Dow Jones Index – Daily Chart
Nikkei 225 Index Outlook:
Asia-Pacific stocks look set to trade mixed on Friday as investors attempted to digest news on US stimulus, virus conditions and macroeconomic data. Japan’s Nikkei 225 index opened mildly lower, setting a downbeat tone the rest of the day. Singapore’s Non-Oil Domestic Export (NODX) came in at 5.9% YoY, falling short of a 10.8% forecast.
Technically, Nikkei 225 has likely formed a ‘Rising Wedge’ in its daily chart (shown below), with an immediate resistance level found at around 23,740 (161.8% Fibonacci extension). Its near-term momentum remains bullish-biased, as the 20-, 50- and 10-Day Simple Moving Average (SMA) lines are all sloped upwards. An immediate support level can be found at 23,380 (20-Day SMA) and then 23,250 (50-Day SMA).
Nikkei 225 Index – Daily Chart
--- Written by Margaret Yang, Strategist for DailyFX.com
To contact Margaret, use the Comments section below or @margaretyjy on Twitter
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.