Stocks Remain Steady Amid Rate Hikes and Trade War

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Stocks Remain Steady Amid Rate Hikes and Trade War

Last week, the Federal Reserve increased interest rates, citing solid economic expansion and a robust labor market. The central bank’s portfolio of Treasury and mortgage-backed securities slipped below $4 trillion for the first time in more than four years as a result of weekly asset sales totaling more than $50 billion. Before the year is over, investors anticipate one more rate increase.

Several significant economic announcements will be watched closely by traders the next week. Monday will see the publication of the ISM Manufacturing Index, Wednesday will see the release of the ADP Employment Report, and Friday will see the release of the non-farm payrolls. Investors will also be closely monitoring any developments in the Sino-American trade conflict, which has gained momentum.

Italian politicians broke the EU’s austerity requirements in their most recent budget, according to reports from outside. The financially precarious nation unveiled plans that call for a 2.4% budget deficit over the next three years. Following the news, ratings agencies are anticipated to lower Italian bonds, which might cause the regional economy to become unstable. Investors Face Worst Returns in 10 Years (also see).

S&P 500 Remains Near Record

The bottom of the rising wedge chart pattern was reached by the SPDR S&P 500 Trust ETF (SPY), which dropped 0.3% last week. Investors should look for a breakdown from trendline support to the pivot point and 50-day moving average around $285.50 or a rebound from trendline support toward trendline and R1 resistance at about $294.00. Technically speaking, the relative strength index (RSI) shows just a little overbought condition at 60.62, but the moving average convergence divergence (MACD) witnessed a bearish crossing, which may indicate more negative in the future.

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Industrials Give Up Ground

After a false breakthrough, the SPDR Dow Jones Industrial Average ETF (DIA) dropped 0.85% last week and returned to its price channel. Investors should look for a move to the downside into the upper trendline resistance at roughly $267.50 or a bounce upward around R2. When examining technical indicators, the RSI, which now has a value of 63.09, still seems to be somewhat overbought, but the MACD may experience a bearish crossing. Red Flags Waving Amid Bull Market’s Record Gains for more information.

Tech Stocks Reverse Decline

The Invesco QQQ Trust ETF (QQQ) had the strongest week among major indices, rising more than 2%. The index has been drifting near upper trendline support for the last month after breaking down from its price channel. Investors should keep an eye out for a move down to the 50-day moving average at $181.63 or a breakthrough back into its price channel. Technically speaking, the RSI is a little high at 60.95, but the MACD may have a positive crossing soon.

Small Caps Break Lower

The worst-performing major index during the last week was the iShares Russell 2000 Index ETF (IWM), which dropped close to 1%. The 200-day moving average is at $159.70, and traders should look for a breakdown from the trendline and S1 support at approximately $166.75 to S2 support or a rise higher to retest the upper trendline and R1 resistance around $175.64. The RSI seems neutral at 45.17 when viewed in terms of technical indicators, while the MACD is still in a long-term negative decline. (Check out The Economy Is Flashing Warning Signs to Investors for further reading.)

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StockCharts.com provided the charts. The only way the author is invested in the specified stock(s) is via index funds that are passively managed.

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