Social media drags tech stocks, dollar rebound continues

Investors are hitting the pause button with the relentless buying of US stocks as big-tech’s actions following the mayhem at the Capitol drag sentiment down.  Social media platforms have taken some strong positions following the Capitol riots and that is raising expectations that when the dust settles, congressional efforts to regulate big tech will become high on the agenda.  The banning of President Trump’s major social media platforms was expected as big-tech tries to distance themselves from last week’s riots that left five people dead.  Facebook, Apple, Alphabet, Facebook and Twitter are off session lows but for many traders the increased chances of legislation on privacy, antitrust, and Section 230 have changed their fundamental outlooks.  For stocks to completely get their mojo back, big-tech fears need to ease.

House Democrats began the impeachment process today as they charge the president with “incitement of insurrection”.  The House, however, may decide not to send over the article of impeachment to the Senate until after inauguration day.

Adding to the selling pressure is the belief that despite the Democratic sweep in Georgia, the Biden administration will still struggle to implement their agenda as conservative Democrats Manchin from West Virginia and Tester from Montana will prove difficult to win over.  The deficit is a big concern for Republicans and conservative Democrats and that might bring down the final price tag of stimulus that Biden is able to push through Congress.  The economy will still get its stimulus and infrastructure spending, but they may be somewhat smaller than initially anticipated.

Treasury yields boost US dollar

The dollar rally continues as traders continue to cover their short positions.  After seeing bearish near a decade high at the end of the year, the consensus trade for a weaker dollar on Wall Street is unraveling.  The dollar’s rebound coincides with the steep rise in Treasury yields.  The upcoming week is filled with Fed speak that will likely draw attention to the policymakers’ comfort level for the steep rise in yields.  The Fed may allow yields to rise a little more, but eventually, they will put an end to this as it poses a risk to the economic recovery.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Ed Moya

Ed Moya

Senior Market Analyst - The Americas at OANDA
With more than 20 years’ trading experience, Ed Moya is a market analyst with OANDA, producing up-to-the-minute fundamental analysis of geopolitical events and monetary policies around the world. Over the course of his career, he has worked with some of the world’s leading forex brokerages and research departments including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including BNN, CNBC and Bloomberg, and is often quoted in leading publications including the Wall Street Journal and the Washington Post. He holds a BA in Economics from Rutgers University.
Ed Moya