S&P 500; US Indexes Fundamental Daily Forecast – North Korean Tensions, Germany Election Fuels Stock Liquidation
The major U.S. stock indexes were down on Monday across the board as investors pared positions on renewed concerns over North Korea and the unexpected outcomes of elections in Germany and New Zealand. The sell-off was led by the NASDAQ Composite which dropped over 1.00 percent.
A rally in crude oil helped boost the energy sector but these gains were offset by a steep drop in technology stocks.
Stocks weakened as investors moved money into safe haven assets like gold, U.S. Treasurys and the Japanese Yen after North Korea’s foreign minister Ri Yong Ho said President Donald Trump’s latest comments and the fly-by from U.S. strategic bombers over the week-end amounted to declaring war on North Korea.
Ri also added that North Korea has the right to shoot down strategic U.S. bombers even if they are not in North Korean airspace.
Sellers took advantage of a market that was weakened early in the session after populists gained ground in a Sunday election in Germany. German Chancellor Angela Merkel won a fourth term in office but her conservative bloc only secured 33 percent of the vote, its lowest share since 1949, according to Reuters.
The far-right Alternative for Germany (AfD) took 12.6 percent of the vote and will become the first nationalist right-wing party to enter the German parliament since World War II.
In other news, Federal Reserve Bank of New York President William Dudley said the U.S. central bank should maintain its gradual pace of policy tightenings as temporary factors holding down price pressures fade. This signaled the Fed remains on track to raise interest rates again in December.
Chicago Fed President Charles Evans offered a more cautious perspective on Monday. Speaking in Grand Rapids, Michigan, Evans said that he was “broadly comfortable” with the median estimate of the Fed’s quarterly projections, which showed its overnight policy rate ending 2019 at 2.7 percent.
Evans also said, “We (the Fed) should avoid taking policy steps that could be misread as a lack of concern over the inflation outlook. In my view, that would be a policy misstep that would further delay achieving our inflation objective.”
Later today, Federal Open Market Committee Member Neel Kashkari speaks at 2230 GMT.
Additionally, the CBOE Volatility Index, widely considered the best gauge of fear in the market, climbed to 11.19, its highest since September 11.
This article was originally posted on FX Empire
