Opening Bell: Gold Falls, Dollar, Stocks Rally Ahead Of U.S. CPI

Key Events

After trading higher than their Friday close, yesterday, most stocks ended lower. They were dragged down by the two leading US indices—the S&P 500 and Dow Jones Industrial Average. Still, the NASDAQ Composite and the Russell 2000 managed to close in positive territory.

Investor sentiment had at first been buoyed by the fruitful combination of spectacular growth in new jobs via Friday's Nonfarm Payroll release and subdued wage growth, indicating that inflation won't be rising. However, as the day progressed, investors woke up to the persistent reality of US President Donald Trump's protectionist stance. His tax cuts may have been a windfall for corporations, but his tariffs on steel and aluminum are anything but.

US-based global industrial giants would bear the brunt of a trade war, if countries hit back with hefty tariffs on US exports. These companies are in fact highly dependent on exports to foreign markets and would also be strongly affected by higher material costs.

France's Minister of the Economy Bruno Le Maire told CNBC yesterday that the EU will join forces with foreign jurisdictions to counter the US's protectionist stance. An obvious natural ally would be China, the US's largest trading partner.

The S&P 500 closed 0.13 percent lower, with Industrials tumbling 1.2 percent. The sector's drag on the broader index becomes even more evident when we consider that the second worst performing sector, Health Care, fell 0.43 percent: just about one third of losses incurred by shares of Industrials. Consumer Cyclicals (+0.6 percent) and Telecommunications (+0.5 percent) were the best performing sectors, painting a mixed picture of defensive and growth stocks, revealing a lack of market leadership.

The Dow Jones Industrial Average came in 0.6 percent lower at 25,206, pulled down by Boeing (NYSE:BA) (-2.9 percent) and Caterpillar (NYSE:CAT) (-2.4 percent).

The NASDAQ Composite posted a fresh record as it clinched a straight seventh positive day, closing 0.4 percent in the green.

The US Treasury blocked Broadcom's (NASDAQ:AVGO) $117 billion bid for US chipmaker Qualcomm (NASDAQ:QCOM), citing concerns of national security and indicating that Singapore-based Broadcom hadn't given sufficient notice on its plans to re-domicile to the US.

The acquisition, which would have marked the biggest deal in tech history, was allegedly opposed by Trump on worries that it would give China the ability to overshadow US technology. Broadcom shares soared 3.6 percent following the news, as it quashed fears that the acquisition would drain the company's coffers.

Yesterday's jump (1) created an upside breakaway gap, which (2) leaped over its falling trend line since late November and (3) formed a second higher peak, completing an ascending series of peaks and troughs, reversing the trend upward.

Meanwhile, Micron Technology (NASDAQ:MU) closed 8.8 percent higher, after Nomura almost doubled its price target on the stock, from $55 to a cool $100 per share. Romit Shah, managing director and senior analyst at the bank, believes the group's shares are in the 'early stages of another major breakout.'

The Russell 2000 shared yesterday's advances with the NADSAQ, but unlike its tech-heavy peer, the small-cap benchmark has yet to overcome its previous peak, which it hit in January. The domestic companies listed on the Russell 2000 are not reliant upon exports for growth. Therefore, these stocks would be immune from the headwinds of a looming trade war—an advantage that has helped the index, and shares traded on it, become a market favorite in the current climate.

Global Financial Affairs

This morning, European shares gained ground as the STOXX Europe 600 Index ticked higher for a seventh consecutive day, clinching its longest winning streak since October 2017, mainly helped by oil and mining shares.

In Asian trade, Japanese stocks listed on the TOPIX fluctuated before closing higher, while Chinese shares listed on both Hong Kong's Hang Seng index and the mainland Shanghai Composite slipped.

Futures for the S&P 500 climbed, suggesting the underlying index is set for a positive opening.

The yen weakened as investors digested the political fallout of a land-sale scandal involving Japan's Finance Minister Taro Aso. Technically, the rally rose above the downtrend line since January 5, increasing the probability for a dollar bottom against the haven currency.

Elsewhere, US 10-year yields inched up to 2.88 percent after Monday’s Treasury auction came in broadly in-line with expectations.

The dollar rebounded as investors await the US CPI reports for clues on the pace of Federal Reserve policy-tightening, pushing gold lower, forming a potential top.

Bitcoin surged to $9,268, after sliding lower for the fifth straight weekday yesterday. Technically, the price is ranging right on a small double-top's neckline. The equal pressure by supply and demand demonstrates the importance of this price level for the trend.

WTI crude oil moved higher.

Up Ahead

All times in EDT

• 7:30: US – CPI for February is expected to hold at 2.1% YoY but fall to 0.2% from 0.5% MoM. Core inflation is forecast to be 1.8% YoY, in line with last month, while the MoM figure falls to 0.2% from 0.3%. This is a key indicator for the Fed, and investors are sure to focus on it after the recent selloff on inflation fears, raising odds for higher rates.

• 18:50: Japan – BoJ Minutes: these will provide clues on the Japanese central bank's policy direction.

• 21:00: China – Retail Sales (February): forecast to rise 9.8% from 9.4%.

Market Moves

Stocks

• The STOXX Europe 600 Index gained 0.1 percent , hitting the highest in two weeks with its seventh consecutive advance.

• Futures on the S&P 500 Index advanced 0.2 percent to the highest in almost six weeks.

• The MSCI Asia Pacific Index climbed 0.2 percent to the highest in two weeks.

• The MSCI Emerging Market Index increased 0.2 percent to the highest in more than five weeks.

Currencies

• The Dollar Index climbed 0.2 percent to 90.06.

• The euro was unchanged at $1.2334.

• The British pound fell 0.1 percent.

• The Japanese yen dipped 0.5 percent to the weakest in two weeks.

Bonds

• The yield on 10-year Treasuries climbed one basis point to 2.88 percent.

• Germany’s 10-year yield advanced one basis point to 0.64 percent.

• Britain’s 10-year yield gained less than one basis point to 1.495 percent, the highest level in a week.

Commodities

• WTI crude fell 0.2 percent to $61.22 a barrel.

• Gold decreased 0.4 percent to $1,318.44 an ounce, the weakest level in more than a week.

• LME aluminum advanced 0.2 percent to $2,096.00 per metric ton.