US open: Wall Street rallies as attention shifts to the Fed

Stocks on Wall Street look poised to rebound as fears over Evergrande contagion ease. Attention now shifts to the Fed which kicks off its two day meeting today.

USA (2)

US futures

Dow futures +0.7% at 334190

S&P futures +0.6% at 4384

Nasdaq futures +0.64% at 15110

In Europe

FTSE +1.1% at 6983

Dax +1.4% at 15351

Euro Stoxx +1.2% at 4093

Learn more about trading indices

Stock rebound

The mood in the market has picked up considerably since yesterday’s blood bath. Taking a step back expectations have cooled that Evergrande could be China’s Lehman’s moment. Wall Street considers that China has this under control allowing investors to turn their attention to the Fed, which kicks off its two-day FOMC meeting today.

The Fed will update with its quarterly economic forecasts and the dot plot. There is a good chance that if the Fed don’t start tapering, they will at the very least pave the path for a move in November. It is quite widely acknowledged now that the US economy doesn’t need this currently level of support from the Fed.

The US economic calendar is quiet today. Housing starts and building permits revealed that the US housing market was on a solid footing.

Where next for the Dow Jones?

The selloff in the previous session saw the Dow Jones break through some key levels. The index broke below its 100 sma at 34700 and horizontal support at 34500 hitting a low of 33930, a level last seen two months earlier. The index is rebounding today. Any meaningful recovery will need to reclaim 34500 and 34700. Buyers are only likely to gain traction above the 50 sma at 3500 which could pave the way to 35250. Sellers will be looking for a move below 33930 to 33730 the July low.

DOWchart

FX – USD eases, CAD pares losses

The US Dollar is edging lower off monthly highs as the Fed’s two day meeting kicks off later. It is expected to trade relatively range bound ahead of the Fed’s press conference tomorrow.

USD/CAD is giving back yesterday’s gains. The rebounding oil price and Canadian election results have under pinned the Loonie. Canada’s ruling Liberal Party led by Prime Minister Justin Trudeau returned to power though failed to gain an outright majority.

USD/CAD -0.5% at 1.2750

GBP/USD  +0.18% at 1.3680

EUR/USD  +0.14% at 1.1742


Oil rebounds on tight supply

Oil prices are heading higher paring at least some of yesterday’s losses. As market sentiment recovers the markets have shifted their focus back onto the tight supply situation in the US. The recovery in output has taken much longer than most anticipated and Shell even warned today that a full return to output is unlikely until 2022 given the damage caused by Hurricane Ida.

US tight supply is overshadowing other factors such as concerns surrounding Evergrande and any potential wider crisis which it may trigger and of course the Fed’s next steps.

18% of the Gulf’s oil production remains offline.

API crude oil stock pile data is in focus later.

WTI crude trades +0.95% at $70.90

Brent trades +0.97% at $74.00

Learn more about trading oil here.

The complete guide to trading oil markets


Looking ahead

21:30 API weekly crude oil stock pile data


How to trade with City Index

Follow these easy steps to start trading with City Index today:

  1. Open a City Index account, or log-in if you’re already a customer.
  2. Search for the market you want to trade in our award-winning platform.
  3. Choose your position and size, and your stop and limit levels
  4. Place the trade.

Build your confidence risk free

More from Indices

Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.