Technically Speaking

Outside Markets Holding Firm Despite Coronavirus Concerns

Todd Hultman
By  Todd Hultman , DTN Lead Analyst
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Even though the U.S. and world economy both face a new wave of rising coronavirus infections, financial markets are showing no significant concerns to date, helped by the Federal Reserve's commitment to keep interest rates near zero (DTN ProphetX chart).

S&P 500 Index:

The S&P 500 Index closed at 3,557.54 Friday, down 27.61 points on the week, but still not far from last week's record high of 3,645.99. In the most recent report, the U.S. Commerce Department said nominal GDP rebounded to $21.158 trillion in the third quarter, down just 1.8% from a year ago. However, with new daily cases of coronavirus hitting new highs in the U.S., there are concerns about the economy contracting again in the first quarter of 2021. Technically, however, the S&P 500 Index remains in an uptrend, near its all-time high, and shows no sign yet of turning lower. Uptrends are also seen in China's Shanghai Composite Index and copper -- two signs of optimism regarding the world economy.

Yield on 10-Year T-Note:

The yield on a U.S. 10-year Treasury note slipped from 0.893% last week to 0.829% Friday, staying below 1.0% since late March while the Federal Reserve remains committed to keeping interest rates near zero. Many U.S. businesses continue to struggle with how coronavirus has changed the way we interact and the things we do. With no solution in sight, the Fed is not likely to change its accommodative monetary policy anytime soon. Technically, the yield on 10-year T-notes remains in a downtrend, below resistance at 1.0%. The 0.398% low in early March is the lowest on record and will likely hold, while this market takes a long time to build a base of support.

U.S. Dollar Index:

The December U.S. Dollar Index closed at 92.397 Friday, down 0.358 on the week and staying near its lowest price in 2 1/2 years. Even though the U.S. economy turned in a better third-quarter performance, so did economies in other countries, and the coronavirus threat has not yet gone away. While the Federal Reserve is in no position to start raising interest rates, it is difficult to make a case for a higher U.S. dollar. Technically, the March low of 91.746 was the lowest in nearly three years and is apt to be a source of support as prices take time to build a broader base of support.

The current financial market environment, marked by low interest rates and a rising stock market in the face of coronavirus concerns, is generally supportive for commodity prices, including U.S. grain and livestock.

Todd Hultman can be reached at Todd.Hultman@dtn.com

Follow him on Twitter @ToddHultman1

Comments above are for educational purposes and are not meant to be specific trade recommendations. The buying and selling of grains and grain futures involve substantial risk and are not suitable for everyone.

Comments above are for educational purposes and are not meant to be specific trade recommendations. The buying and selling of commodities or commodity futures involves substantial risk and are not suitable for everyone.

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