US Close – Biden allows cyclical rotation trade to return, weak 7-year auction, Pessimism grows on Suez Canal blockage, Gold down but not out

Wall Street remains in wait-and-see mode until how quickly jobs come back now that the Biden administration has the US poised to reach herd immunity by early summer.  President Biden’s first formal news conference confirmed the new goal of having 200 million vaccine shots administered in his first 100 days in office.  He also committed to seeking re-election in 2024.  Biden reiterated his next major initiative is to rebuild infrastructure.  Yesterday, the White House announced Biden will unveil his multi trillion-dollar infrastructure plan in Pittsburgh.  The cyclical rotation trade was due for a snapback and Biden’s aggressive vaccine rollout and infrastructure initiatives will be very supportive for the Russell 2000 index.

Facebook, Twitter, and Google shares all traded lower as their respective CEOs testified to Congress on the spread of misinformation on their platforms.  Technology stocks struggled as reopening trade somewhat got its groove back today.
US stocks finished the day on a strong note as Biden clearly laid out a plan that supports US growth exceptionalism in the near-term.

7-year results
The dollar rallied after the heavily anticipated seven-year notes sales attracted soft demand.  Investors had this auction circled on their calendars after the late-February 7-year sale posted a record low 2.04 bid-to-cover, which was much lower than the 2.35 average for previous six auctions.
Today’s auction sold $62 billion in 7-year notes at an auction-high yield of 1.300%, 10.5 basis point north of the previous auction in February and 2.5 basis points above the notes’ yield in pre-sale trading.  The top with Treasury yields appears like it will hold in the short-term as investors focus on month-end and situation in Europe.

Gold prices fell to session lows immediately after the weak US 7-year note auction but continues to find support from the two-week trading range.  Growth expectations will peak soon in the US and that along with Europe getting COVID under control will be the catalysts for gold investors to become bullish.
Selling pressure has eased over the past couple of weeks for gold and that should continue if we are nearing the end of the latest US dollar rally.  If Treasury yields continue to consolidate, gold should start attracting inflows.

Crude prices are lower but refusing to break below the demand woe lows from earlier in the week.  The Suez Canal blockage seems like it will at the very least last into next week.  Oil prices should start stabilizing here after President Biden boosted the US COVID vaccination goal, which should accelerate reopening momentum.
The crude demand outlook won’t drastically improve until Europe is starting to ease COVID restrictions and that won’t happen probably closer till May.

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Ed Moya

Ed Moya

Senior Market Analyst, The Americas at OANDA
With more than 20 years’ trading experience, Ed Moya is a senior market analyst with OANDA, producing up-to-the-minute intermarket analysis, coverage of geopolitical events, central bank policies and market reaction to corporate news. His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies. Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with, 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 CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business and Sky TV. His views are trusted by the world’s most renowned global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Breitbart, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.
Ed Moya