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S&P 500; US Indexes Fundamental Daily Forecast – Early Signs Today Will Be a “Risk-Off” Session

James Hyerczyk

The major U.S. stock indexes closed lower on Tuesday on profit-taking and stock rotation. The benchmark S&P 500 Index was pressured by weaker telecommunications, industrials and utilities. Facebook, Netflix and Google-parent Alphabet all closed higher, but this couldn’t help the NASDAQ Composite hold on to its earlier gains. The Dow was also pressured but gains were limited by a 1.4 percent jump in McDonald’s stock. Disney fell nearly 3 percent on reports that it was close to buying key assets from 21st Century Fox.

In the cash market, the S&P 500 Index settled at 2629.57, -9.87 or -0.37%. The Dow Jones industrial Average finished at 24180.64, down 109.41 or -0.45% and the tech-based NASDAQ-100 Index closed at 6765.26, down 10.11 or -0.15%.

December E-mini S&P 500 Index


The current leg of this bull market has been driven higher on optimism surrounding the overhaul of the U.S. tax system. Investors expect the final deal will be struck before Christmas, but if there are any snags or delays then the process may continue into 2018. At this time, most investors are betting on a Christmas date which is why they have been buying stocks.

The fact that the U.S. House and Senate still have to hammer out a few details of the tax plan has allowed uncertainty to creep into the stock market. This is encouraging a few investors to pare positions and book profits after a tremendous run-up over the short-run.

Daily December E-mini Dow Jones Industrial Average

One of the concerns is a possible U.S. government shutdown. This may be helping to offset optimism about progress on tax reform legislation. Bearish investors, worried about a government shutdown, are saying that the Democrats may be trying to take advantage of a battle within the Republican Party over keeping the government open.

Although stock market investors are closing tracking the progress made by U.S. lawmakers to pass a bill that will overhaul the American tax system, they also appear to remain cautious in view of further uncertainties over the outcome of the Brexit talks.

In other news, Asia markets are down sharply across the board on Wednesday after U.S. stocks declined overnight. The Nikkei had its biggest percentage drop since late March. Weak materials and energy sectors dragged the Australian ASX 200 down 0.44 percent.

Daily December E-mini NASDAQ-100 Index

Weakness in Asia and the U.S. is also expected to put the European markets on the defensive.

We could be looking at another volatile session on Wednesday in the U.S. markets. Reasons for investors to reduce their appetite for risk continue to mount. Uncertainty surrounding Brexit negotiations is one. Others include political and geopolitical issues regarding the Trump Administration.

Issues are being raised and investor sentiment is getting hit on worries over tax reform, travel bans and Trump’s relationship with Russia. President Trump is also set to announce that the U.S. will recognize Jerusalem as Israel’s capital on Wednesday. This move is controversial in the Middle East.

This article was originally posted on FX Empire