S&P 500 Pauses Record Rally, Hang Seng and ASX 200 Drift Higher

S&P 500, HANG SENG, ASX 200 INDEX OUTLOOK:

Dow Jones, S&P 500 and Nasdaq 100 closed -0.15%, -0.02% and -0.19% respectively
Chinese trade balance, UK GDP and US core inflation rate are in focus today
Alibaba surged 6.5% after monopoly fine, other technology shares fell broadly in Hong Kong however

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Treasury, Earnings, Alibaba, China Trade, Asia-Pacific at Open:

Wall Street equity indices paused their record rally on Monday, with the Dow Jones, S&P 500 and Nasdaq 100 indexes closing just beneath their all-time highs. There appeared to be lack of fresh catalysts overnight to fuel further gains after Friday’s rally, while investors awaited earnings from several big banks. The outlook for earnings appear to be very positive, thanks to rapid vaccine rollouts, unprecedented monetary and fiscal stimulus support and revitalized global growth.

The estimated Q1 earnings growth rate for the S&P 500 is anticipated at 24.5%, according to data from FactSet. The actual number could be even higher as corporate America tends to lower their EPS forecasts and deliver positive surprises. Meanwhile, St Louis Fed president James Bullard noted that a 75% vaccination rate may pave the way for the Fed to consider tapering its bond purchasing program. Currently, the vaccination rate in the US is close to 40%.

Treasury yields climbed modestly following smooth 3- and 10-year note auction sessions. The 30-year note auction will be conducted on Tuesday. The DXY US Dollar index retreated to 92.08 as traders eye Tuesday’s release of US inflation data, where the headline rate is expected to climb to 2.5% from 1.7% a month ago. A higher reading may boost expectations for a faster Fed tapering and thus a stronger US Dollar and lower equity prices, whereas a slower figure may lead to the reverse.

DXY US Dollar Index

Chart from TradingView

Asia-Pacific equities are poised to open mixed. Futures in Japan, mainland China, Taiwan, Malaysia, India and Thailand are in the red, while those in Hong Kong, Australia, South Korea and Singapore are slightly higher. Australia’s ASX 200 index opened 0.19% higher, led by information technology (+0.75%), healthcare (+0.38%) and consumer staples (+0.21%) sectors, whereas real estate (-0.23%) and energy (-0.14%) trailed behind.

Hong Kong’s Hang Seng Index (HSI) fell 0.86% on Monday as Alibaba’s antitrust fine rippled a broad selling among technology shares. Investors are worried that tightened regulatory control will eventually hit other tech companies with market dominance, such as Tencent, Meituan, JD.com, Baidu and Pinduoduo. Alibaba’s share price surged 6.5% in Hong Kong as the long-persisting uncertainties surrounding the monopoly probe was finally removed. CEO Daniel Zhang said on Monday that Alibaba does not expect any material impact from changes to its exclusivity arrangements with merchants.

Looking ahead, Chinese trade data headlines the economic docket alongside UK GDP and US inflation prints. Chinese exports in USD terms are expected to grow 38.0% YoY in March, and imports growth at 24.4% YoY due to an inflated base effect. Find out more from theDailyFX calendar.

Looking back to Monday’s close, 8 out of 11 S&P 500 sectors ended higher, with 62.6% of the index’s constituents closing in the green. Consumer discretionary (+0.56%), real estate (+0.55%) and consumer staples (+0.45%) were among the best performers, while energy (-0.94%) and information technology (-0.48%) trailed behind.

S&P 500 Sector Performance 12-04-2021

Source: Bloomberg, DailyFX

S&P 500 Index Technical Analysis

The S&P 500 indexbreached above the ceiling of the “Ascending Channel” and extended higher, underscoring strong upward momentum. The index is attempting to challenge a key resistance level at 4,125 – the 161.8% Fibonacci extension. Breaching above it may open the door for further upside potential with an eye on 4,268 (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, suggesting that bulls are still in control.

S&P 500 Index – Daily Chart

Hang Seng Index Technical Analysis:

The Hang Seng Index (HSI) has likely formed a “Head and Shoulders” chart pattern, which serves as a bearish trend-reversing indicator. There could be more downside room if the pattern completes. An immediate resistance level can be found at the 50-day SMA line (29,187), whereas an immediate support level can be found at 28,334 – the 23.6% Fibonacci retracement. The MACD indicator is about to form a bearish crossover beneath the neutral midpoint, suggesting that bearish momentum is dominating.

Hang Seng Index – Daily Chart

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