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Opening Bell: Valuations, Virus, Vaccines Boost USD, Treasuries; Stocks Plunge

By Investing.com (Pinchas Cohen/Investing.com)Market OverviewJan 28, 2021 09:47AM ET
www.investing.com/analysis/opening-bell-valuations-virus-vaccines-boost-usd-treasuries-stocks-plunge-200557349
Opening Bell: Valuations, Virus, Vaccines Boost USD, Treasuries; Stocks Plunge
By Investing.com (Pinchas Cohen/Investing.com)   |  Jan 28, 2021 09:47AM ET
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  • Mega-tech stocks disappoint
  • COVID vaccine delays persist
  • Pandemic restrictions dent market optimism

Key Events

A host of themes, including missed earnings, valuation concerns, the rate of contagion of COVID-19 as well as vaccine delays, weighed on Dow, S&P, and NASDAQ futures on Thursday. On the other hand, contracts on the Russell 2000 managed to trade in positive territory.

Yields remain under pressure and gold fell for the sixth consecutive day.

Global Financial Affairs

US contracts on the S&P and NASDAQ fell on disappointing earnings from mega-cap tech player Tesla (NASDAQ:TSLA), dispelling our expectations and prompting an aftermarket selloff. Apple (NASDAQ:AAPL) earnings surpassed expectations, but the shares fell on valuation concerns.

In Europe, the STOXX 600 Index dropped out of the gate, as traders navigated disappointing earnings from Swatch Group (SIX:UHR) and dramatic revenue declines at EasyJet (LON:EZJ) versus earnings beats for chipmaker STMicroelectronics (PA:STM) and alcoholic beverage maker Diageo (LON:DGE).

Perhaps what tilted the scale downward is the ongoing disagreement between the EU and AstraZeneca (NASDAQ:AZN) on vaccine supply and the resultant slowdown in the European rollout.

As the next session up after Wednesday's significant selloff in the US, Asian shares took a beating this morning, with the pessimism that pervaded Wall Street transfered to regional markets. The seesaw of expectations between the likelihood of a recovery of economies ravaged by the most horrific health crisis in 100 years versus ongoing stifling social restrictions, escalated with the UK and Norway introducing new restrictions on visitors' entry on concerns about new strains of the virus.

It is unclear, however, whether these selloffs express the expectation that corporate earnings will disappoint because of the coronavirus, or whether traders just don’t care how well companies fared in the previous quarter, and are now more focused on finding the end of the dark tunnel that has been lengthened by new, more contagious and more lethal strains of COVID-19.

Hong Kong’s Hang Seng dropped 2.5%, posting the worst decline in more than 8 months as lack of liquidity exacerbated the sour mood after the steepest US market slump in months.

US equity losses after yesterday's closing bell continued as concerns of overstretched valuations returned to the fore, weighing particularly on ETFs. The S&P 500 Index registered the worst decline since October, shedding 2.6% of its value as the Fed interest rate announcement did not include the promise of more economic support. All 11 sectors were at least 1.3% deep in the red, with Real Estate as much as 3.25% lower.

In its continuing balancing act, the Fed yesterday made clear it will not stop its already gargantuan support of the US economy, propelling Treasuries higher, weighing on 10-year yields, pushing them back below the 1% mark.

Yields dropped for the fourth straight day, blowing out a bullish pennant, retracing much of its preceding spike.

10-year Treasuries Daily
10-year Treasuries Daily

The 0.99% level will be its next test, as the November-December highs converge with the 50 MA above the bottom of a rising channel.

The dollar built on yesterday’s biggest gains since September, as the greenback attempted to bottom.

Dollar Index Daily
Dollar Index Daily

The USD retested the H&S neckline for the second straight day. An upside breakout would include the completion of a massive bullish pattern.

Gold continued its decline, after hitting the top of a falling channel since the March high, as the 50 DMA crossed below the 200 DMA triggering a Death Cross, and the RSI and MACD appear to be ready to register bearish signals.

Gold Daily
Gold Daily

This bearish view on gold corresponds to the bullish view on the dollar.

Investment bank Guggenheim’s Scott Minerd claims institutional demand can’t justify Bitcoin’s price, but if our interpretation of a falling flag is right, and it completes with an upside breakout, it will head toward the $50,000 mark.

Oil is struggling between the profit-taking range of a falling-flag and the price’s uptrend since the Nov. 2 bottom.

Oil Daily
Oil Daily

An upside breakout will signal a rally to $60. However, the Biden administration decision to pause all new oil and natural gas leases on federal lands may also drive the future price.

Up Ahead

Market Moves

Stocks

  • Futures on the S&P 500 Index decreased 0.3% as of 8:20 a.m. London time.
  • The Stoxx Europe 600 Index dipped 1%.
  • The MSCI Asia Pacific Index fell 1.9%.
  • The MSCI Emerging Markets Index fell 1.7%.

Currencies

  • The Dollar Index advanced 0.1% to 90.74.
  • The euro decreased 0.1% to $1.2103.
  • The British Pound sank 0.2% to $1.3655.
  • The onshore yuan strengthened 0.1% to 6.478 per dollar.
  • The Japanese yen weakened 0.2% to 104.28 per dollar.

Bonds

  • The yield on 10-year Treasuries sank one basis point to 1.01%.
  • The yield on two-year Treasuries was unchanged at 0.12%.
  • Germany’s 10-year yield dipped less than one basis point to -0.55%.
  • Britain’s 10-year yield declined one basis point to 0.262%.
  • Japan’s 10-year yield fell one basis point to 0.04%.

Commodities

  • West Texas Intermediate crude declined 0.7% to $52.48 a barrel.
  • Brent crude dipped 0.6% to $55.48 a barrel.
  • Gold weakened 0.2% to $1,839.86 an ounce.
Opening Bell: Valuations, Virus, Vaccines Boost USD, Treasuries; Stocks Plunge
 

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Opening Bell: Valuations, Virus, Vaccines Boost USD, Treasuries; Stocks Plunge

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Comments (6)
Renatata Ambos
Renatata Ambos Jan 28, 2021 11:08AM ET
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disappointing earnings?! my Mobile phone.
Pinchas Cohen
Pinchas Cohen Jan 28, 2021 11:08AM ET
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Read my response below.
Fin Tecker
Fin Tecker Jan 28, 2021 9:04AM ET
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Dispointing earnings?! You’re kidding, aren’t you?
Pinchas Cohen
Pinchas Cohen Jan 28, 2021 9:04AM ET
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Look at my reply to earlier comments.
Härra Telefon
Härra Telefon Jan 28, 2021 8:31AM ET
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GME to the moon! Banksters to prison!
Renzo Francesqui
Renzo Francesqui Jan 28, 2021 7:57AM ET
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Dissapoiting earnings from Apple?? someone explain me I thought Apple got its highest earnings
Pinchas Cohen
Pinchas Cohen Jan 28, 2021 7:57AM ET
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You're right. Error. Concerns of overvaluations. Thanks for catching this.
Donato Iorio
Donato Iorio Jan 28, 2021 7:54AM ET
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I have a question. Can 3 companies produce and distribute 14 billion vaccines (world pop is 7bln) in 1 year and should the vaccines need a tweeking because of the variant viruses can these 3 companies produce and distribute another 14 bln vaccines in time for year end?
Jeff Paper
Jeff Paper Jan 28, 2021 7:54AM ET
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14 billion? Paying customers only. Nothing is free in the world.
Donato Iorio
Donato Iorio Jan 28, 2021 7:54AM ET
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Jeff Paper  I see saving a life depends on how much money one has. I know that won't work well with God. Having been in the light and touched God's face and come back from being hit by a car I assure you that kind of thinking in this world will not go well in the afterlife.
ebony marshall
ebony marshall Jan 28, 2021 7:46AM ET
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apples earnings weren't disappointing though. article fails to mention the big squeeze coming on Friday and many investors selling off higher priced stocks to help gather more capital.
Pinchas Cohen
Pinchas Cohen Jan 28, 2021 7:46AM ET
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You're right. Error. Concerns of overvaluations. Thanks for catching this.
ebony marshall
ebony marshall Jan 28, 2021 7:46AM ET
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it happens :) you do good work tho. always appreciate your write ups
 
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