Dow Jones soars as Fed blackout period starts, ASX 200 at risk due to China economic woes

Thursday’s Wall Street trading session recap

Stocks on Wall Street roared higher on Wednesday following persistent losses since the middle of August. The Dow Jones, S&P 500 and Nasdaq 100 futures climbed 1.32%, 1.78% and 2.08% respectively. These were some of the best single-day moves in just about one month.

The rally was broad-based. Looking at the chart below, about 95% of stocks in the S&P 500 closed higher. The best-performing sectors included utilities, consumer discretionary and materials. Energy underperformed as WTI Crude oil plunged to its lowest since the middle of January.

Traders seemed to take on risk as Treasury yields pulled back, indicating a slight fade in hawkish Federal Reserve policy expectations. Perhaps investors adjusted their positioning as the blackout period before September’s monetary policy announcement commenced.

S&P 500 sector breakdown 9/7/2022

Dow Jones technical analysis

The 1.32% push from the Dow on Wednesday meant that it closed back above the 61.8% Fibonacci retracement level at 31398. Still, it remains below the 20- and 50-day Simple Moving Averages. The latter could hold as resistance, reinstating the downside focus. Otherwise, further losses place the focus on the 78.6% level at 30624.

Dow Jones futures daily chart

Thursday’s Asia-Pacific trading session

Turning to Thursday’s Asia-Pacific trading session, APAC markets might look forward to following the rosy tone set on Wall Street over the previous 24 hours. This could set the stage for a rally in Australia’s ASX 200 and Japan’s Nikkei 225.

As far as economic event risk goes, Australia will be releasing July’s trade figures. The nation’s trade surplus hit a record AUD17.7 billion in June, largely driven by elevated export prices such as grains and metals. A smaller AUD14.6 billion surplus is seen.

Still, the Reserve Bank of Australia hiked rates earlier this week and opened the door to more ahead. This could make life difficult for the ASX 200. On top of that, China’s economic slowdown poses a risk given key trading relationships. The city of Chengdu, a key megacity, extended lockdowns.

ASX 200 technical analysis

The ASX 200 just barely managed to hold onto a close under the midpoint of the Fibonacci retracement in the chart below. Prices stopped short of the 61.8% level at 6683 before trimming losses. This price serves as key immediate support. A confirmatory close under it could open the door to resuming the downtrend since August. Otherwise, keep a close eye on the 20- and 50-day SMAs for resistance.

ASX 200 daily chart

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