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From the Floor: 'Almost too good to be true' — #SaxoStrats

   • US Fed's Dudley confident regarding inflation
   • Brexit talks begin with focus on settlement, citizens' rights
   • Nasdaq 100 surges 1.6% as tech stocks turn it around
   • Energy sector weighed down by Libyan, US oil production
   • 'Still room for higher highs' in S&P 500: Larsson

By Michael McKenna

The US tech sector made a determined move higher Monday with financials surging as well on the back of the latest Federal Reserve interest rate hike.

The New York Fed's Dudley was out Monday with a hawkish address in which he expressed confidence in continued inflation gains while Fed vice-chair Stanley Fischer will speak today. According to Saxo Bank head of forex strategy John J Hardy, it will be interesting to see whether a hawkish "party line" is coalescing within the central bank.

 The Nasdaq 100 climbed by 1.6% and while Saxo Bank head of equities strategy Peter Garnry says the move appears "almost too good to be true" given the lack of an obvious catalyst, there is similarly no real reason to foresee an imminent correction despite mixed data of late.

"A close above 5,775 in the Nasdaq 100 could see us head to 6,000 and beyond," says Saxo technical analyst Kim Cramer Larsson, adding that the S&P 500 could push higher yet, despite sitting at record levels.

"We might be seeing a rising wedge developing on the S&P 500 chart," says Larsson.

Nasdaq 100
Nasdaq 100

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Source: Saxo Bank 

Monday also saw Brexit talks commence between the European Union and the UK with the "divorce settlement" to be paid by London, along with citizens' rights, the key area of focus.

US bond yields are headed higher in a development that Hardy says could see USDJPY return to local highs, though he cautions that more solid economic data are needed are to move the needle significantly.

While tech and banking shares are performing robustly, Garnry remains negative towards the energy sector as continued crude oil production from Libya and the US – where the number of active fracking wells is hitting a three-year high – is adding to the global glut.

"Opec can't balance the market at this level," says Garnry.

The American Petroleum Institute's weekly statistical bulletin is due at 2030 GMT today, and Wednesday will bring a decision on whether mainland Chinese stocks will be added to the MSCI Emerging Markets index.

Wall Street
Wall Street bulls are pushing US stocks higher. Photo: Shutterstock 

Michael McKenna is an editor at Saxo Bank


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