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  • Wall Street bracing for trade talk disappointments sending benchmarks lower.
  • US data disappoints in the lead into the CPI later in the week.  

Federal Reserve’s governor Powell, who said that the Fed will begin expanding its balance sheet through purchases of short-term US government debt, failed to lift spirits on Wall Street on Tuesday. However, the comments did  instigate  a rally that in Treasuries and there was also a slight unwinding of year-end funding concerns.

However, the DJIA ended over 300 points lower as investors weigh the prospects of a trade deal as minimal considering the numerous headlines that would suggest otherwise.  The Dow Jones Industrial Average, DJIA, dropped 313.98 points, or 1.2%, to 26,164.04, while the S&P 500 index lost 45.73 points, or 1.6%, to 2,893.06. The Nasdaq Composite Index also fell 132.52 points, or 1.7%, to finish at 7,865.

US data disappoints in lead into the CPI

As for US data,  the US producer price index (PPI) fell 0.3% m/m in September on both a headline and core basis, the biggest drop since February 2015. “The annual rate of core PPI inflation slowed to 2.0%, a two year low. The data suggest that firms are absorbing the cost of new tariffs rather than passing them on. USD112bn of Chinese imports tariffs were levied last month,” analysts at ANZ Bank explained.  


DJIA levels

The index has stalled at the 21, 50 and 200-day moving averages having completed and extended beyond a 50% mean reversion of the August to recent swing highs and en-route for a test of the psychological 26000 level again. A break to the upside and through the mentioned DMA accumulating around the mid-point of the 26000s in line with the Sep lows-resistance line in the mid-26000’s will open prospects back to the Sep highs through 27200.