Major U.S indexes absorb continued slides in tech shares, investors anticipate Wednesday rate hike

June 12, 2017
By Vlad Karpel

U.S indexes are trading lower today, following a second continuous round of losses in technology sectors. A sector rotation into energy, industrials and financials offset losses somewhat. Goldman Sachs, along with other analysts, have been warning that tech stocks have been overextended and were due for corrections. Strong corporate earnings reports in this sector are also important to consider in this selloff period.   Additionally, investors are looking to Wednesday for a widely expected interest rate hike from the Fed.

Notable stock movers today include General Electric Co. (GE) and Apple Inc. (AAPL). After the announcement of GE CEO Jeff Immelt’s retirement and subsequent replacement by GE Healthcare CEO John Flannery, shares are up 3.74%. Mizuho Securities has recently downgraded Apple from buy to neutral and shares are currently down 3.17%, compounding a larger tech sell-off trend.  

The DJIA is currently down 0.28%, or 58.42 points, at 21,212.90. The Nasdaq-100 is down 0.71% at 6,164.85 and the S&P 500 is currently trading at 2,425.40 which is down 0.27% from the open.

Using the ^GSPC symbol to analyze the S&P 500, our 10-day prediction window shows  overall positive signals. Today’s negative vector figure of -0.01% moves to +0.07% in the next three sessions. Today’s support and resistance is 2,420.50 (± 3.48) and 2,445.94 (± 3.51), respectively. The predicted close today is 2,431.01.   



Crude oil prices are looking up today after last week’s sharp declines, and investors are anticipating another round of data on both U.S domestic supplies and production, as well as OPEC global output rates. U.S rig counts continue to rise, clocking in a net gain of 8 drilling platforms as of last week. The total rig count is now at 741 which is the highest since April of 2015- according to U.S driller Baker Hughes.  West Texas Intermediate for July delivery is currently priced at $46.41 per barrel, up 1.22% from the open.  

Looking at USO, a crude oil tracker, our 10-day prediction model shows mixed signals and choppy movement. The fund is currently trading at $9.58, which is up 0.95% from the open. Today’s prediction sees support at $9.38 (± 0.08) and resistance at $9.77 (± 0.08). The predicted close for today is $9.52. Vector figures show +0.71% for today, which turn downward to -0.28% within four trading sessions before making positive corrections.  All vector figures are based on today’s market conditions.  



The price for August gold is currently down 0.28% at $1,268.50 a troy ounce. Investors are pricing in the likelihood of a Fed hike of benchmark interest rates, which will make yield-bearing assets more attractive than the yellow metal- which does not provide a yield. Additionally, a strengthening U.S dollar is having an inverse impact on gold. The attractiveness of gold to investors holding foreign currencies is weakened when the U.S dollar is stronger, as it is priced in that currency.  

Using SPDR GOLD TRUST (GLD) as a tracker in our Stock Forecast Tool, the 10-day prediction window shows consistent downward movement. The gold proxy is currently trading at $120.45, down 0.07% from the open. Today’s predicted low is $119.11 (± 0.26) and the predicted high is $120.57 (± 0.27). The predicted close today is $120.45.  



Treasury yields are continuing to rise for a third straight day as investors look toward a consequential two-day Fed meeting set to conclude this Wednesday. Although it is widely assumed a quarter-point rate hike will occur this week, investors will also be keen on looking toward future hikes the rate at which they may occur. A political setback for the 5 Star Movement- a euroskeptic Italian political party which has recently gained momentum- has proved to ease investor anxiety around eurozone volatility. This is similar to the market reaction after far-right French candidate Marine Le Pen lost the presidential election in May. The yield on the 10-year Treasury note is currently up 0.15% at 2.21%. Bond prices and yields are typically inversely related to one another. At 1 p.m. Eastern today, there will be an auction of $30.59 billion worth of 10 year Treasury notes.

Using the iShares 20+ Year Treasury Bond ETF (TLT) as a proxy for bond prices in our Stock Forecast Tool, we see fluctuating but positive trends in our 10-day prediction window. Relative to current conditions, we see vector figures moving from +0.12% today to +0.25% after fluctuations in three trading sessions.  The ETF is currently priced at $124.98- up 0.39% from the open. The predicted close today is $124.44 with a low and high of $123.91 (± 0.19) and $124.96 (± 0.20), respectively.  



The CBOE Volatility Index (VIX) is currently up 10.56% at 11.83, and our 10-day prediction window shows a jump in upward movement in the next few trading sessions. The predicted close today is 11.89 with a positive vector of +4.85%. Today’s predicted lows and highs are 11.16 (± 0.43) and 13.39 (± 0.51), respectively.

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