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US stocks drift lower and close lower for the third consecutive day

  
Analysis, US Market

Stocks struggle to move higher

The US stocks could not sustain positive levels and drifted lower into US afternoon. The major indices are closing lower for the third consecutive day.

At the close, Apple announced that they would have to cut production of the iPhone due to chip crunch.  Apple shares are down -1.1% after the close.
  • Dow S&P and NASDAQ post a three day stock decline
  • S&P closes around 4% from its all-time high
  • Dow closes about 3% from its all-time high
  • NASDAQ closes -6% below its all-time high
The final numbers are showing:
  • Dow Jones -117.72 points or -0.34% at 34378.33
  • S&P index -10.56 points or -0.24% at 4350.64
  • NASDAQ index -20.27 points or -0.14% at 14465.93

European equity close: Moderate selling weighs on stocks

  
Analysis, Global Indices
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Closing changes for the main European bourses:

  • UK FTSE 100 -0.3%
  • German DAX 0.4%
  • Italy MIB +0.2%
  • French CAC -0.4%
  • Spain IBEX +0.4%
The periphery did better today. In Spain stocks opened much lower but recouped the losses quickly and then finished at he highs of the day. The IBEX daily chart continues to consolidate but that’s a nice rejection of the lower trendline.
Closing changes for the main European bourses:

Fed’s Clarida: Gradual taper concluding mid-2022 may soon be warranted

  
  Analysis

Comments from the Fed vice chair

Comments from the Fed vice chair
  • Risks to inflation are to the upside
  • Fed would react to persistent upside move in inflation expectations but that isn’t happening now
  • Decision on pace of asset purchases won’t be intended to carry signal about timing of rate hikes
  • Labor market progress has been notable
  • Inflation running ‘well above’ moderate overshoot of 2% goal
  • This year’s unwelcome inflation surge will be largely transitory
  • Bar for taper on inflation ‘more than’ met while on employment it’s ‘all but met’
This is similar to his September speech.
  • The big unknown is how long it will take bottlenecks to be resolved
  • There is a flavor of stagflation right now
  • Stagflation is not my baseline case and I don’t think it will be the trend going forward
  • Delta has complicated the signal on the labor market

Drop in the ZEW survey points to more trouble for the euro

  
  Analysis

A sign of how hard the energy crisis is hitting

The German ZEW business sentiment survey is one of the better high-frequency data points for Europe and today it sank to 22.3 from 26.5.
Zew survey
At this point we should be seeing sentiment ratchet higher but it’s already back to mid-cycle levels — and mid-cycle wasn’t very strong in Europe.
The number emphasize how hard the supply chain woes and energy crisis are hitting German manufacturing. At the moment, those are still temporary problems but the timeline to straighten them out is extending. At the same time, costs are going up, eroding margins.
One of the relief valves is the currency and the fall in the euro will act as a bit of a buffer but with the euro already at the lows of the week and showing little signs of life despite the recent rout, there’s likely more to give.
EURUSD 1 hour chart

US dollar jumps across the board after USD/JPY move

  
Analysis, Forex

USD/JPY leading the way again

USD/JPY leading the way again
Every fresh seven-year high in USD/JPY prompts another wave of buying. This leg was strong enough to boost the dollar right across the board.
It comes with 10-year Treasury yields ticking higher to 1.608% but not yet to the Friday high of 1.62%. If that gives way, we could see another leg. Note though that there’s a 10-year auction today at 1 pm ET.
I would expect this move to transition into more of a ‘sell-the-yen’ trade across the board but equities might have ideas of their own.
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