Dow Jones Forecast: Stocks fall as treasury yields hit 5%

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Fiona Cincotta
By :  ,  Senior Market Analyst

US futures

Dow futures -0.3% at 33013

S&P futures -0.28% at 4212

Nasdaq futures -0.34% at 14522

In Europe

FTSE -0.27% at 7377

Dax -0.67% at 14718

  • US 10-year yields rise over 5%
  • Tech earnings in focus this week
  • Chevron to acquire Hess Corporation
  • Oil eases as hopes of diplomacy in the Middle East remain

Yields rise over 5%

U.S. futures are heading lower as U.S. Treasury yields rise and as attention turns to major tech earnings later this week.

The three main indices on Wall Street fell last week as US treasury yields topped 5% on Friday, its highest level since the financial crisis of 2007 before easing lower. However, today yields rose back above 5% as investors become warier over the likelihood of the Federal Reserve keeping interest rates higher for longer, particularly in light of Federal Reserve chair Jerome Powell's speech last week where he drew attention to the strength of US economy and the tight labour market.

US Q3 GDP and core CPI inflation data, both out later in the week, will be watched closely for further clues over the resilience of the US economy.

Investors also show nerves ahead of this week's corporate results, with earnings due from major tech stocks. Microsoft and Alphabet are due to report on Tuesday, Meta on Wednesday, and Amazon on Thursday. Those stocks, in addition to Apple, Nvidia, and Tesla, have accounted for most of the S&P's 10% year-to-date rally, so the index is vulnerable to disappointing earnings from these stocks.

Corporate news

Chevron is falling after announcing that it plans to buy rival Hess Corporation in a deal worth $53 billion, implying a 4.9% premium to the share price’s previous close. The deal comes after rival Exxon made a $60 billion offer for Pioneer Natural Resources a few weeks ago.

Apple is expected to open lower after Foxconn, the major supplier of Apple's iPhones, faces a tax probe in China.

Dow Jones forecast – technical analysis.

The Dow Jones is heading lower, testing 33000 support. The 50 sma crossing below the 100 sma and the RSI below 50 keeps sellers hopeful of further declines. Immediate support can be seen at 32815 the October low. A break below here opens the door to 32580, the May low. On the upside, any recovery would need to rise anove 33300 the September low, before exposing the 33500 the 20 sma. Above this the 200 sma at 33830 comes into play.

dow jones forecast chart

FX markets –USD holds firm, GBP falls

The USD is holding firm at the start of the week, supported by elevated U S treasury yields. 10-year treasury yield rose above 5% following Fed chair Jerome Powell's comments last week, which fueled bets that interest rates may need to stay higher for longer.

EUR/USD is rising above 1.06 despite the risk-off mood in the equities market and higher U S treasury yields. Attention is turning to eurozone consumer confidence data, which is due later and expected to tick lower to -18.3, down from -17.8. Weak consumer confidence usually points to slower private consumption, painting a gloomy picture of the outlook of the euro area. The ECB is expected to keep interest rates on hold when it announces the rate decision on Thursday.

GBP/USD is edging lower on a quiet UK economic calendar day. With no UK data releases, sentiment is in the driving seat. Investors remain focused on higher US treasury yields and on the conflict in the Middle East. Tomorrow, UK data releases pickup with PMIs and UK unemployment figures.

EUR/USD +0.08% at 1.06

GBP/USD -0.03% at 1.2160

Oil eases with Middle East in focus & amid hopes of diplomacy

Oil prices are inching lower after gains across the previous week, as investors continue to focus on the situation in the Middle East and diplomatic efforts to contain the Israel-Hamas conflict.

Concerns over potential supply disruption in the Middle East if the conflict broadens out sent oil prices over 1% higher last week, marking the second straight weekly gain.

Today, news of aid convoys arriving in Gaza and increasing efforts to find a diplomatic solution, including a summit meeting in Cairo for Arab leaders, is seeing oil prices drop.

The US has suspended sanctions on APEC member Venezuela, which has also helped to ease concerns over oil supply.

WTI crude trades -0.79% at $87.30

Brent trades -0.6% at $90.70

Looking ahead

15:00 Eurozone consumer confidence


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