Dow Jones Retraces on Hopes of Stimulus, Nikkei 225 To Lead Asia Lower

NIKKEI 225, DOW JONES INDEX OUTLOOK:

  • Dow Jones retraced amidst re-sparked hopes of a stimulus, weaker than expected employment data
  • The US Dollar Index rose to a week high, Michigan consumer sentiment, US retail sales in focus
  • Nikkei 225 index edge lower, Singapore NODX drop short of expectations

DOW JONES INDEX FORECAST

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The Dow Jones index made a V-shaped pullback on Thursday and closed lower trading at 28,494, driven by more hopes for a relief stimulus bill that is critical to the pending recovery of the US economy. Nancy Pelosi, the House Speaker stated that the stimulus package would not have to wait upto January. Also, President Trump said that he was willing to proceed with the $1.8 trillion stimulus package. This was in contrast to the dismal image painted by Steven Mnuchin, the Treasury Secretary who indicated that the chances of closing the deal before the November elections are thin.

However, the market sentiment was largely fragile as the 2nd viral covid-19 wave seemed to have gone up in different parts of the world, resulting in partial lockdown measures and travel restrictions. The initial US unemployment claims unexpectedly shifted up last week, indicating some weak signs in the job market. The real reading was seen at 898,000 versus the 825,000 forecasts. The DXY index rose to a week high at 93.8, pointing to the rising demand for more safety.

Weekly US Employment Claims

dow jones index

Source: Bloomberg

Corporate earnings continue to deliver extra positive surprises that might help cushion the stock market’s consolidation downside. All the 5 S&P 500 components that released their third-quarter results on Thursday beat the forecasts made by the analysts. Bank of New York Mellon and Honeywell are amongst the major US firms to release their earnings on Friday along with the US retail sales as S&P 500 Index Falls With Hopes of Stimulus, ASX 200 Climbs With RBA Touts Easing.

Sector-wise, six out of the 9 Dow Jones sectors closed in green with over half of the indices component forms rising on Thursday. Consumer staples (+0.53), consumer discretionary (+0.59%) and energy (+0.77%) were the top performers, whereas healthcare (-0.29%), and information technology (-0.89%) lagged.

Source: Bloomberg

Technically, the Dow Jones seemed to have gotten into the consolidative phase after it came off a 6-week high. The Fibonacci drawings down on the following chart show that the key support levels can be seen at the 28,390 Fibonacci (23.6% retracement) and then 28,040 Fibonacci (38.2% retracement). The 50-day and 20-day Simple Moving Average lines can also be seen as the dynamic support levels.

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