US Stocks Smashed on Valuations Warnings – Nasdaq Down 2%
US stocks tumbled overnight as senior bank executives sounded the alarm over excessive market valuations, sparking a wave of risk aversion across major indices. The S&P 500 and Nasdaq took big hits, down 1.17% and 2.04% to 6,771 and 23,348 respectively, suffering their sharpest losses in nearly a month, while the Dow Jones also continued to retreat, closing down 0.53% at 47,085. In the bond market, US Treasury yields eased slightly, with the 2-year slipping 2.9 basis points to 3.576% and the 10-year down 2.5 bps to 4.085%, as investors remained cautious amid the continuing lack of US government data due to the ongoing shutdown. The US dollar extended its recent rally, with the DXY gaining 0.31% to 100.19, levels not seen since early August. Commodity markets weakened as the stronger dollar weighed further on sentiment. Brent crude fell 0.96% to $64.27, while WTI dropped 1.13% to $60.38. Gold also came under pressure, losing 1.73% to close at $3,932.09.
Gold Takes a Hit in Busy Markets – Drops 1.7%
Gold traders had another busy day yesterday as the world’s favourite precious metal dropped nearly 2% on the day, when some would have been hoping that safe-haven flows would have seen a move in the opposite direction. Traditional correlations have broken down over the last couple of months, and yesterday’s trading was another good example for gold players as it fell in line with major equity indices. Gold is now over 9% lower than its recent all-time high in October and is approaching its recent low at $3,886.02. From a technical perspective, if we see a break under this level in the next couple of days’ trading, we could then see a deeper correction back to the September breakout level of $3,500.
Another Busy Day Ahead for Traders
It looks like being another busy day ahead for traders after a volatile final session yesterday. The Asian session has already seen the release of New Zealand employment data, which dropped slightly on a quarterly basis, leading to a fall in the Kiwi dollar. We are scheduled to hear from RBNZ Governor Christian Hawkesby later in the day, which could add further volatility to the “flightless bird.” There is little on the calendar in the London session, but we do have some data due out of the US once New York opens, with the non-government ADP Non-Farms due for release (exp. +32k) and the ISM Services PMI data (exp. 50.7), with traders expecting big moves around the prints given the lack of other data releases recently. Later in the day, we have the possibility for more fireworks in the market when President Trump speaks in Miami, and Canadian markets will be paying close attention near the day’s end when Bank of Canada Governor Tiff Macklem speaks in front of the government in Ottawa.
