U.S. Markets Sell Off, Asia Mixed

Overnight, markets in the United States sold off sharply after Fed comments. Markets were already mixed before the Fed chimed in thanks to earnings season.

We were off to a very mixed start then we got a whole slew of preannouncements where the negative far exceeded the positive by a 10:1 margin. Federal Reserve’s Dennis Lockhart said if nothing else unexpected happens, expect the taper to continue this month with another round.

The markets were already drifting lower at that point. His comments sent them into a triple digit fall. Stocks have been trading rather poorly the last day or so as they are a bit overvalued and we are seeing profit taking. Keep in mind the S&P was up more than 29 percent at one point.

STOCKS
The DJIA had its worst trading day since Sept. 20. The Dow lost 179.11 points or 1.1 percent to close the day at 16,257.94. All of its components, except for one were in the red. The S&P 500 lost 23.17 points. That was a 1.3 percent drop to finish at 1,819.20. Discretionary spending and energy were the worst of its components. The Nasdaq Composite lost 1.5 percent or a 61.36 point drop to close at 4,113.30.

Asian markets are largely mixed and lower after the US selloff.

The Nikkei is currently down 375 points and at its lowest level in a month. This is thanks to a strong upsurge in the yen as the Dollar is weaker thanks to the weak NFP report. The USD/JPY is near 102.98, Monday’s one month high.

The Shanghai Composite is bucking the trend and currently up 0.57 percent on the day. It has come up a bit from yesterday’s five month low as the yuan hit a new high versus the Dollar at 6.0415. Investors are concerned with the PBOC skipping open market operations once again. Short term money market rates have come down a little, but there are concerns of a liquidity problem. Later this week, China will release its Q4 GDP. That will be a market mover.

The ASX 200 in Australia has slumped over one percent today and is at its lowest level in over three weeks. Investors are cautious ahead of earnings season. The AUD has hit a one month high versus the Dollar.

CURRENCIES

AUD/USD (0.9031) is well above 0.90 and has touched a high of 0.9087. While above 0.90 we can target 0.92. Weakness will return on a fall back below 0.8950.

EUR/USD (1.3662) is finding support at the congestion area at 1.366 to 1.3690. We are weak only below 1.3550. For now expect this rally to target 1.37/3725. GBP/USD (1.6385) fell from 1.65 and is stuck in a sideways range from 1.6210 towards 1.66. While above 1.62 expect a rally towards 1.6750.

COMMODITIES
Gold (1251.20) is steady and back above 1250. While above this level we could move up to 1275 and then 1300. Back below 1250 sees a dip to 1225. Silver (20.355) is moving higher and could now target 20.50. Till then expect some sideways movement from near 19 to 20.45. Copper (3.345) is trading near 3.35. Buyers and sellers are trying to decide whether or not to go higher or lower. The market is unsure here and we need clear signals.

TODAY’S OUTLOOK
Busy economic calendar today

7:30 EST Retail sales

8:30 EST Import Prices

10:00 EST Business inventories

Plus Charles Plosser from the fed will talk about the economy at 12:45 EST as well as Richard Fischer.