US stocks close near session lows

Stocks still off into the close

The US stock indices sold off into the close and are closing near the low levels for the day.

  • The Dow and S&P are lower for the 2nd consecutive day
  • Utilities and Communications lag
  • Materials and Real Estate lead
A look at the indices at the close show:
  • Dow -249.40 points or -0.72% at 34496.84
  • S&P index -30.31 points or -0.69% at 4361.04
  • NASDAQ index -93.33 points or -0.64% at 14486.21
WTI crude oil futures hit this highest level in 7 years. The US treasury market was closed in observance of Columbus Day.  But concerns about higher interest rates persistent the market. The U.S. Treasury will auction off three and 10 year notes tomorrow at 1 PM ET. They will auction off 30 year bonds on Wednesday.

Eurostoxx futures -1.2% in early European trading

Risk on the defensive in early trades

  • German DAX futures -1.2%
  • UK FTSE futures -1.2%
  • Spanish IBEX futures -0.9%
There is some slight catching up involved to the declines in US stocks yesterday but for the most part, this reflects the defensive and sluggish sentiment today as well.
US futures are also marked lower, with S&P 500 futures down 0.4%, Nasdaq futures down 0.7%, and Dow futures down 0.2% to get things started on the session.
Major currencies are little changed but if the defensive posture keeps up, we may see some risk aversion flows start to seep in later in the day.

Futures – The CME has lowered margins for gold, silver, platinum

Chicago Mercantile Exchange Group has lowered initial and maintenance Performance Bonds (margins) for

and other contracts but highlighting those above here.
New bond requirements will be effective after the close of business on Friday, May 7, 2021.

Eurostoxx futures +0.7% in early European trading

Some catch up play for Europe going into the open

  • German DAX futures +1.1%
  • UK FTSE futures +0.6%
  • Spanish IBEX futures +0.6%
After the more upbeat mood in US equities yesterday, European indices have some catching up to do following the Easter break since last Friday.
The early gains belie the more measured risk mood so far today though, with US futures pulling back slightly after yesterday’s stellar advance. S&P 500 futures and Dow futures are down 0.2% while Nasdaq futures are keeping flatter with Treasury yields a touch lower.
That is keeping the dollar steadier and major currencies little changed so far on the day.

Moody’s downgrades UK credit rating to Aa3 from Aa2, outlook stable

Moody’s cuts the United Kingdom

Boris Johnson
This isn’t entirely unexpected but you hate to see it. Fitch recently affirmed the UK at AA-, which is the equivalent of Aa3. S&P remains one notch higher at AA but it’s under review.
Moody’s cited three reasons for the sovereign downgrade:


Eurostoxx futures +0.7% in early European trading

A bit of catch-up play in early trades

  • German DAX futures +0.6%
  • UK FTSE futures +0.8%
  • Spanish IBEX futures +0.4%
European indices close the day near the lows yesterday, down by over 2% across the board, missing out on the late recovery in US equities towards the latter stages.
Hence, the gains here are largely due to some catch-up play and belies the more tepid and cautious risk mood to kick start the session.
US futures aren’t doing a whole lot, with S&P 500 and Nasdaq futures keeping at flat levels at the moment. Major currencies are also mostly little change besides some mild strength in the yen, with AUD/USD seen a little weaker under its 100-day moving average.

Eurostoxx futures +0.5% in early European trading

Some mild optimism flowing in early trades

  • German DAX futures +0.6%
  • UK FTSE futures +0.4%
  • Spanish IBEX futures +0.4%
US futures have also moved higher in the past hour, with S&P 500 futures now up ~0.7% while Nasdaq futures have pared losses to flat levels now and that is feeding to some slight positive momentum to start European morning trade.
In the currencies space, the aussie is also ticking a little higher with AUD/USD now testing 0.7300 and the confluence of its key hourly moving averages @ 0.7294-13.
USD/CAD is also nudged lower from 1.3110 to 1.3090 and testing the confluence of its own key hourly moving averages @ 1.3086-91 currently.

SoftBank sits on $4B profit on options trade – FT

SoftBank up $4B

SoftBank up $4B
All the talk Friday was about SoftBank’s huge position in equity options and how it may have contributed to the blow-off moves we saw in the tech sector last week.
The FT reports that the trade is sitting on a $4 billion trade.
For all the attention it has gotten, that strikes me as a small number. Founder Masayoshi Son once lost $70B in the dot-com crash and the company is worth close to $100B. SoftBank lost $17.7B on WeWork and Uber last year.
The strategy has focused on options related to individual US tech stocks. In total, it has taken on notional exposure of about $30bn using call options – bets on rising stock prices that provide the right to buy stocks at a preset price on future dates. Some of this position has been offset by other contracts bought as hedges.
“It’s just a levered punt on the market,” said one person with direct knowledge of the trades. “The whole strategy is just momentum buying.”
Without knowing the details of the trade — including the timeline — it’s tough to evaluate. However if the whole strategy is really just momentum buying, then Thurs/Fri showed how quickly it could blow up.
For me though, the whole thing is overblown. $30B is notional (again, depending on the details), really isn’t that much.

Eurostoxx futures +0.7% in early European trading

Optimistic tones observed in early trades

  • German DAX futures +0.9%
  • UK FTSE futures +0.9%
  • Spanish IBEX futures +0.6%

European indices ended yesterday more mixed in another somewhat disappointing session, but the late gains seen in US stocks is giving risk buyers another shot in trading today.

This sets up a firmer open for equities later but that isn’t quite translating into much for the major currencies space as the focus remains on the dollar, as it meets some key technical crossroads going into the session ahead.

The weekly oil inventory data is due out at the bottom of the hour

Private data last night showed a bigger than expected drawdown of crude inventories

The Department of Energy will release their weekly inventory data.

The private API numbers from last night showed:
  • crude oil -8.587M vs -3.35M est.
  • gasoline -1.748M vs -1.3M estimate
  • distillates +3.824M vs +100K est
  • Cushing +1.63M
The price of September WTI crude oil futures are up $1.68 or 4.03% at $43.39. The price shot through the 50% retracement of the 2020 move lower at $41.71.  The contracts 200 day moving average is at $43.92. The high price today has reached $43.52
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