American and European futures are tumbling today as the number of Covid-19 cases continue rising around the world. In the US, futures tied to the Dow Jones, S&P 500, and Nasdaq 100 are down by 0.70%, 0.68%, and 0.50%, respectively.
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Rising Covid-19 cases
In Europe, DAX index, FTSE 100, and Euro Stoxx 50 indices have fallen by more than 1%. This decline is mostly because of the surging number of Covid-19 cases in Europe and the measures governments have put in place.
In Italy, the number of cases rose by a record 21,000 yesterday while in Spain, they rose to more than 19,000. The same trend happened in countries in Ireland, United States, and France. As a result, governments have announced several measures to limit the spread, including some sort of lockdown.
Such measures are negative for companies in the DAX index, Dow Jones, and all indices. That is because these firms will be forced to limit their operations at a time when they are attempting to recover. It will also lead to weak demand as more people stay at home.
In Germany, the DAX index is also falling because of the weak performance by SAP, the giant software company. In a report released earlier today, the company said that it expects revenue of 27.2 billion to 27.8 billion euros this year. That is lower than the previous guidance of 27.8 billion to 28.5 billion euros. It also expects its operating profit to fall to between 8.1 billion and 8.5 billion.
Fading hopes of stimulus
Meanwhile, in the United States, the Dow Jones and other indices are falling because of the fading hopes of a stimulus deal. Over the weekend, the White House and congress continued to trade blame over the deadlock. Without stimulus, analysts expect the economy to continue flattening, with more companies expected to lay-off their staff.
Investors are still thinking of corporate earnings. According to Factset, 27% of companies in the S&P 500 have already released their quarterly earnings. In general, most companies have released better numbers. 84% of the firms have reported a positive EPS surprise while 81% of them have released a positive earning surprise. Still, companies have reported 18.5% earnings decline because of the impacts of the pandemic.
Elsewhere, in Hong Kong, the Hang Seng index did not trade today because of a bank holiday. Still, investors are excited because of the upcoming Ant Financial IPO. In Japan, the Nikkei 225 is down by 0.10% while in Australia, the ASX 200 is down by 0.20%.
Dow Jones technical outlook
The three-hour chart shows that the Dow Jones futures gapped lower early today. It dropped to a low of $28,077, which is substantially below last week’s high of $28,495. The price has moved below the 61.8% Fibonacci retracement level. It is also below the support of $28,150. It is also below the descending trendline shown in pink and below the 25-day and 15-day exponential moving averages.
Therefore, the index is likely to continue falling as bears aim for the next support at $28,000. On the flip side, a move above the Friday’s close of $28,288 will invalidate this trend.