US equities are rising today as investors digest the US stimulus situation. Futures tied to the Dow Jones, S&P 500, and Nasdaq 100 have gained by 0.45%. In Asia, the Hang Seng index has jumped by 0.92% while the Nikkei 225 is down by 0.10%. Meanwhile, in Europe, futures tied to the DAX index are up by 0.90% while those tied to the FTSE 100 and CAC 40 are down by about 0.20%.
The performance by US equities is a sharp reversal from what happened yesterday, when the Dow Jones and S&P 500 ended lower by more than 1.40%. This weakness was mostly because of a decision by Donald Trump to halt the ongoing negotiations between the White House and congress on the next stimulus. Ironically, the announcement came a few hours after the Fed chair warned that the economy was at risk without stimulus. By futures rising, investors seem to be hopeful that a deal will be made even before the election.
US equities also declined after two reports by congress about big tech firms. In their report, Democrats warned that Amazon, Facebook, Alphabet, and Apple were monopolies that need to be dealt with. This could mean breaking some of these firms. For example, Facebook could be asked to separate itself from Instagram while Amazon could be asked to change its third-party marketplace. As a result, shares in the four companies dropped by more than 3%.
In Europe, the DAX index is rising even as data from Germany showed a drop in industrial output. In general, industrial output declined by 0.2% in August after three consecutive months of gains. This decline was mostly because of the auto sector, which forms a substantial part of the DAX index. Meanwhile, the FTSE 100 is falling because of the rising risks of a no-deal Brexit.
The US dollar index (DXY) rose today as investors reacted to the stimulus deal. Later today, the index will move as traders react to the FOMC minutes. It will also react to statements by Fed members like John Williams and Neel Kashkari.
Dow Jones technical outlook
The four-hour chart shows that the Dow Jones dropped to an intraday low $27,638. The index has also risen in the past two consecutive four hours. Interestingly, the index started rising when it hit the ascending blue trendline that connects the lowest level on 25th September and the lowest level on October 2.
Therefore, I suspect the pair will continue rising as bulls aim for the next resistance level of $28,200. However, a move below yesterday’s low of $27,638.
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Dow Jones Daily Chart
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