S&P 500 Index Hits Record Highs as Bond Yields Drop, Nikkei 225 Falls as Machine Orders Contract

S&P 500, NIKKEI 225, ASX 200 INDEX OUTLOOK:

Dow Jones, S&P 500 and Nasdaq 100 closed -0.20%, +0.33%, and +1.21% respectively
Markets shrugged off higher US inflation readings and moved higher. 30-year bond auction met decent demand, pulling longer-dated yields lower
The Nikkei 225 fell as machinery order tumbled -7.1% YoY
Singapore GDP grew 0.2% YoY. The MAS kept monetary policy unchanged

Recommended by Margaret Yang, CFA

Download our fresh Q2Equity Forecast

US Inflation, Singapore GDP, MAS Policy, Asia-Pacific at Open:

The S&P 500 and Nasdaq 100 indexes registered another record session on Tuesday as investors saw higher-than-expected inflation readings as signs of a strong economic recovery. US consumer price index (CPI) rose to 2.6% YoY in March, reaching a two-and-half year high and exceeding the baseline forecast of 2.5%. The core CPI, which excludes volatile food and energy prices, hit 1.6%. The DXY US Dollar index fell 0.28% overnight, reflecting that traders did not consider higher inflation readings as an imminent trigger for Fed tapering.

Meanwhile, the 30-year Treasury notes met decent demand, sending the longer-dated yields lower. The 10-year rate fell 5.3 bps to 1.62%, alleviating pressure on risk assets and precious metals. Gold prices climbed 0.76% to US$ 1,745 and silver prices advanced 2.15% to US$ 25.32.

Traders are anticipating Q1 results from big banks, with JP Morgan, Goldman Sachs and Wells Fargo kicking off the earnings season on Wednesday. Analysts have painted a rosy picture for bank earnings ahead, as the release of unused reserves alongside loan growth may boost profits in the quarters to come. Bank stocks have risen 26 percent year-to-date, far outpacing the benchmark indexes.

Singapore’s economy expanded 0.2% YoY in the first quarter, beating earlier forecasts of a small contraction. The Monetary Authority of Singapore (MAS) stayed put in the bi-annual monetary policy review, keeping the width and slope of the S$NEER curve unchanged.

US Consumer Price Index (CPI) – Past 12 months

Source: Bloomberg, DailyFX

Japan’s Nikkei 225 index fell 0.50% at open after rising 0.72% a day ago. Japanese machinery orders unexpectedly contracted -7.1% YoY, compared to the baseline forecast of a 2.3% expansion. This may weigh on sentiment as the Covid-19 “state of emergency” declaration in the Tokyo region since early January through end of March appeared to have a larger-than-expected impact.

Looking ahead, the RBNZ interest rate decision headlines the economic docket alongside ECB President Christine Lagarde’s speech. The API and EIA will release the weekly crude oil inventory changes, which may serve as catalysts for oil trading. Find out more from theDailyFX calendar.

Discover what kind of forex trader you are

S&P 500 Index Technical Analysis

The S&P 500 index breached above the ceiling of the “Ascending Channel” and then the 161.8% Fibonacci extension (4,125), therefore opening the door for further upside potential with an eye on 4,268 – the 200% Fibonacci extension. The overall trend remains bullish-biased as suggested by the upward-sloped moving averages. The MACD indicator is trending higher above the neutral midpoint, underscoring strong upward momentum. The RSI indicator has pierced above the overbought threshold of 70.0, suggesting that prices are overstretched and thus vulnerable to a technical pullback.

S&P 500 Index – Daily Chart

Nikkei 225 Index Technical Analysis:

The Nikkei 225 index failed to breach the 30,214 resistance (the 127.2% Fibonacci extension) for a third attempt, potentially forming a “Triple Top” chart pattern. Immediate support levels can be found at 29,440 (50-day SMA) and then 28,357 (100% Fibonacci extension). The MACD indicator is trending lower, suggesting that further consolidation is likely.

Nikkei 225 Index – Daily Chart

Chart by TradingView

ASX 200 Index Technical Analysis:

The ASX 200 index breached above the ceiling of the “Ascending Channel” and moved forward to test a psychological resistance at 7,000. A daily close above 7,000 would likely intensify near-term buying pressure and pave the way for further upside potential towards 7,071 – the 100% Fibonacci extension. The MACD indicator is trending higher above the neutral midpoint, suggesting that buying pressure is building up.

ASX 200 Index – Daily Chart