by Eli Wright
The US dollar has retraced yesterday's sharp gains this morning. Gold and silver are lower, but oil is up. An array of high profile speeches are on the docket today beginning with ECB President Mario Draghi who will speak shortly. The ECB announced earlier that it will leave rates and stimulus unchanged.
Fed Chair Janet Yellen, whose hawkish remarks temporarily pushed the USD higherwill speak again today as will President-elect Donald Trump as well. At the moment, global equity markets are mixed ahead of these events.
Overnight in Asia, the Nikkei rose 0.94% to 19,072.25. However, the Shanghai Composite fell 0.36%, to 3,101.30 and the Hang Seng dropped 0.21%, to 23,049.96.
In Europe this morning, the FTSE is down 0.61%, at 7,203.15; the DAX is 0.09% lower, at 11,589; and the Stoxx 50 has dropped 0.26%, to 3,284.50.
On Wall Street yesterday, the S&P 500 eked out a 0.18 gain, to 2,271.89 and the NASDAQ rose 0.31% to 5,555.65. However the Dow fell 0.11%, to 5,048.38.
In pre-market trading, all three major US indices, the Dow, S&P, and NASDAQ) are down approximately 0.03%.
US Treasury yields are markedly higher today: The 2-year yield is 1.213%; the 10-year yield is 2.426%; and the 30-year yield is 3.007%.
Forex
The USD strong upward momentum has stalled, but overall, bullish dollar sentiment is gaining.
The dollar appears like it might head higher following this morning's positive housing starts report and better-than-expected Philadelphia Fed Manufacturing data. Other possible drivers for the dollar today: Yellen's second speech in as many days and the final speech by President-elect Donald Trump ahead of his inauguration tomorrow.
The euro is also in focus today, after the ECB rate decision and Draghi's press conference.
Yesterday’s worst-performing major was the Canadian dollar, which fell nearly 2% after the Bank of Canada’s monetary policy announcement, at which BoC Governor Poloz said a rate cut remains on the table. The loonie is currently trading at $1.3271.
Another driver for the CAD—which sent the Mexican peso plunging 2% as well—were Commerce Secretary nominee Wilbur Ross’s statements at his confirmation hearing. “NAFTA is logically the first thing for us to deal with,” he said. The peso is currently trading at $0.0456.
Commodities
The stronger dollar has driven gold prices one percent lower, to a flat $1,200 as of this writing. Where the precious metal goes next will depend on both the value of the USD, as well as risk sentiment. However, a look at the technicals show that dips now may be buying opportunities, as gold tries to climb higher.
Silver has slipped nearly 2%, to $16.987. However, here too, despite the long term downtrend, technicals show that silver has been trying to move higher over the past two weeks, so any sell-offs may be short-lived.
Oil prices have moved higher today after encouraging monthly data that showed oil production by OPEC was falling. Crude and Brent are both up 1% this morning, to $51.60 and $54.45, respectively. US crude inventories are due out later today and the EIA report is expected to show that weekly supplies declined by 0.342M.
Stocks
The US stock market remains listless after a flat close yesterday . The S&P has been at a near standstill, neither rising or falling by even 0.4% for nine straight days – the longest such streak since the summer of 2013. Investors seem to be taking a cautious wait-and-see approach before Trump takes office tomorrow, in order to gauge much of his campaign rhetoric will actually be acted upon.
Overall, there were more gainers than decliners on the NYSE yesterday, but two big decliners emerged in bricks-and mortar retail and pharmaceuticals: Target (NYSE:TGT) and Mallinckrodt (NYSE:MNK).
Target was the latest retailer to lower its profit forecast; yesterday the company reported that comparable sales over November and December dropped 1.3%. Shares fell 5.77% as a result.
Mallinckrodt was the biggest decliner on the S&P yesterday; shares dropped 5.85% after the specialty drug manufacturer agreed to pay a fine of $100 million to settle charges that the company illegally purchased the US rights to Synacthen to preserve the monopoly on its competing drug, Acthar. The price of Acthar, used in the treatment of infantile spasms among other things, rose from $40/vial in 2001, to more than $34,000/vial today – an increase of more than 85,000 percent. However, Mallinckrodt shares are up 3.37% in after-hours trading.
Netflix's (NASDAQ:NFLX) Q4 2016 earnings came in lower than expected yesterday—$0.15 vs the expected $0.19 EPS. However, the company reported a record 7.04 million new subscribers in the quarter, the majority of which came from international growth, which accounted for 5.12M of those new members. This metric is considered a key driver for the company's profitability, and the better than anticipated numbers blew away expectations. Shares are up 8.21% in pre-market trading.
Earnings season continues today, with reports by American Express (NYSE:AXP), IBM (NYSE:IBM), KeyCorp (NYSE:KEY), Southwest Airlines (NYSE:LUV), and Union Pacific (NYSE:UNP).