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US stocks attempt to close the gap; Where next?

14:38 12 June 2019

Summary:

  • S&P500 back near last week’s closing level; 2873

  • CPI comes in below forecast

  • Beyond Meat shares tumble on broker downgrade

 

There’s a little bit of softness around in equity markets today as they appear to be taking a pause after the recent strong run higher. The S&P500 managed to push up to a new 5-week high during Tuesday’s session, but failed to hold onto these gains and ended lower for the second day in a row. It appears that there is now some indecision in the market and price earlier fell to its lowest level of the week, almost closing the gap up seen over the weekend from Friday’s close of 2873 in the process.

 

The S&P500 is consolidating after a strong recent run up, with price not far from closing the gap to 2873. Below the 2842 could be seen as the next support. Recent highs of 2912 are possible resistance but a break above there could see another tilt at the record peak of 2961. Stochastics converging and close to printing a negative cross. Source: xStation

 

With next week’s Fed decision very much at the front of trader’s minds at present, inflation data could be seen to take on an even higher level of significance than usual. Expectations of a rate cut are rising and, while this view isn’t really due to falling inflation levels, a drop in the CPI data for April could be seen to reduce the argument for further hikes or even keeping the funds rate on hold to protect against rising prices. The headline Y/Y reading came in at 1.8% vs 1.9% expected with the core reading that strips out food and energy dropping to 2.0% against a consensus forecast of 2.1%.

 

The recent drop in the CPI Y/Y seems to be in keeping with the broader pullback seen in US inflation metrics in the past couple of years. Source: XTB Macrobond  

 

Since making its stock market debut at the start of last month, Beyond Meat has been on a quite sensational run higher, with the price rallying by almost 600% from its IPO level to Monday’s high in the mid 180s. However, yesterday saw the biggest daily drop in the markets short life so far, after a downgrade from JP Morgan saw the stock tumble 25%. JP Morgan is one of the banks that underwrote the initial offering, but analyst Ken Goldman cut his outlook on the company to “neutral” from “buy” in a move that saw the rapid recent rally stopped in its tracks. The market has jumped by nearly 70% in the past two sessions after upbeat quarterly results and a strong 2019 outlook but some air has been let out as the downgrade brought a sobering dose of reality to what had been a face-ripping move higher. The stock has begun brightly this afternoon, rising by almost 5% on the opening bell.

 

Beyond Meat shares fell by as much as 25% yesterday after a downgrade from JP Morgan, putting a halt to the recent strong rally seen in the market since its IPO in early May. Source: xStation


 

This content has been created by X-Trade Brokers Dom Maklerski S.A. This service is provided by X-Trade Brokers Dom Maklerski S.A. (X-Trade Brokers Brokerage House joint-stock company), with its registered office in Warsaw, at Ogrodowa 58, 00-876 Warsaw, Poland, entered in the register of entrepreneurs of the National Court Register (Krajowy Rejestr Sądowy) conducted by District Court for the Capital City of Warsaw, XII Commercial Division of the National Court Register under KRS number 0000217580, REGON number 015803782 and Tax Identification Number (NIP) 527-24-43-955, with the fully paid up share capital in the amount of PLN 5.869.181,75. X-Trade Brokers Dom Maklerski S.A. conducts brokerage activities on the basis of the license granted by Polish Securities and Exchange Commission on 8th November 2005 No. DDM-M-4021-57-1/2005 and is supervised by Polish Supervision Authority.

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CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 77% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 77% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

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