Optimistic overnight gains on Wall Street filtered through to the Asian market on Wednesday but soon turned choppy as investors grapple with higher U.S Yields and China’s economic responses.
Nasdaq futures dropped aftermarket as Netflix reported a miss in subscription numbers, but the tech Index did recover during Wednesday. There might be more headwinds for growth stocks as real yields push into positive territory for the fist time in two years.
The U.S 10-year Treasury Inflation-Protected Securities (TIPS) a.k.a real yields has pushed higher in anticipation of tighter monetary policy, which my mean that stocks might become less attractive. Barry Bannister, chief equity strategist at Stifel said: "Real 10-year yields are the risk-free alternative to owning stocks," Higher yields are not favourable to technology stocks and other high growth sectors which could drag down the broader market.
The Wall Street 30 Technical Analysis
The price action on the Wall Street 30 (WS30) has rebounded from the 34110-support level as discussed in our previous WS30 note. The trendline (purple dotted line) seems to be holding as price pushed higher to the 35038-resistance level which will be watched closely. If the 35038-resistance is broken, then we could expect to see higher prices once again.
The 50-day simple moving average of price (blue line) is also pointing higher and acting as support to higher prices on the 4H chart with the Relative Strength Index (RSI) reaching overbought levels.
Current State / Chart Source: Wall Street 4H Timeframe - GT247 MT5 Trading Platform
Trading Term of the day:
Real Interest Rate
A real interest rate is an interest rate that has been adjusted to remove the effects of inflation to reflect the real cost of funds to the borrower and the real yield to the lender or to an investor. The real interest rate reflects the rate of time-preference for current goods over future goods.
The real interest rate of an investment is calculated as the difference between the nominal interest rate and the inflation rate:
Real Interest Rate = Nominal Interest Rate - Inflation (Expected or Actual)
Take note: The outlook and levels might change as this outlook is released during the current days (Wednesday the 20th of April 2022) U.S Market open.
Sources – MetaTrader5, Reuters, Lewis Krauskopf, Investopedia
Barry Dumas | Market Analyst at GT247.com
Barry has 12 years of experience in the financial markets. He enjoys educating clients on trading / investing and providing punchy technical analysis on securities. He currently holds a Wealth Management qualification and is studying towards becoming a Chartered Market Technician® (CMT) designation holder.
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