Wall Street failed to hold onto early gains, performing a spectacular reversal mid-session, dragged lower by weakness in tech stocks. US equity indices experienced some of the biggest intraday swings of the year overnight, as volatility continues to present itself as the the new norm to trading in 2018.
After having been as much as 300 points higher in early trade, the Dow ended at the lows of the day, down 344 points and once again in correction territory. The S&P 500 closed down 1.7%, after trading a range from positive 0.6% to negative 2.3%, avoiding correction territory by a whisper. The tech heavy NASDAQ Composite declined 2.9%, its third largest drop this year.
Europe to start lower after Tuesday’s dead cat bounce
Asian shares fell in line with Wall Street overnight, with the follow through expected to hit European bourses at the open, turning Tuesday’s rally into nothing more than a dead cat bounce. The trading environment has changed dramatically this year, stock picking will return to the scene in a big way going forward, as last year's more relaxed approach to trading is no longer going to cut it for investors, particularly with respect to tech stocks.
Techs no longer the darlings of Wall Street?
Over the last few years it wasn’t necessary to think twice about buying into tech stocks; the darlings of Wall Street, which rallied almost 40% (S&P tech index) in 2017 alone. However, this year the story has been quite different. Facebook (NASDAQ:FB) continued to fall overnight, now down over 20% from its February 1st peak as the data mismanagement scandal refuses to die a death. NVIDIA Corporation (NASDAQ:NVDA) was the S&P’s largest decliner dropping 7.6% as it announced that it would be temporarily suspending testing driverless cars on public roads following the recent fatality. Netflix (NASDAQ:NFLX) shed over 6% and Apple (NASDAQ:AAPL) 2.5% despite launching a new, cheaper iPad.
With no high impacting UK economic data, traders will be looking out towards a slew of US data points set to be released this afternoon. With so much attention on trade over recent weeks, the US trade balance will not doubt catch the attention of some; however, the US GDP release will gather the most attention on an otherwise relatively quiet economic data week.
US GDP in focus
The economic backdrop was supportive in the last quarter of 2017. Robust jobs growth and healthy consumer spending comfortably propped up the economy, which is expected to be reflected in an upwards revision for economic growth to 2.7% on an annualised basis from 2.5% in the previous estimate. The reading will not yet include the benefits from the tax cuts, nor the more recent uncertainties over global trade. However, given how quiet the economic calendar is, the reading is expected to attract attention anyway.
A surprise to the upside, could boost the possibility of a June rate hike up from the CME FedWatch odds of 78%, lifting the dollar back towards 90.00. On the contrary, should growth remain around 2.5%, we could see buying demand for the dollar decline and the greenback look to test 89.00 once more.
Opening calls
FTSE 100 to open 60 points lower at 6940
DAX to open 120 points lower at 11850
CAC 40 to open 58 points lower at 5057