The US stocks have regained their bullish momentum after being down for the past two weeks following the dollar dominance. The market seems to have gradually returned to a risk-on mode following the weakening of the US dollar index after being unable to break the strong resistance at 105. This gives investors more reasons to diversify their investment in stocks again.
Positive remarks from the US president during the news conference with Japanese Minister Fumio Kishida stating that his administration is considering easing the tariffs on Chinese goods imposed by Trump. The announcement created a positive environment for investments in the US stock market.
The majority of the US stocks have been up with massive gains since Monday till the present moment.
A clear indicator that investors are returning to the risk on mode is the recent increase in the US 10- year yield, which rose by 7 basis points to 2.86%.
Apple up by 4.1%; Tesla has increased by 1.67%; Netflix is up by 1%; Energy Transfer Equity (ET) is up by 1.44%; Walt Disney Company is up by 3.33%; Microsoft is up by 2.97%; Google is up by 2.37%.
On the index, the S&P 500 Index is up by 1.87%, US100 Index is up by 1.68%, and Dow Jones is up by 2%.
What are the significant factors that affect stock prices?
Three main factors determine when investors are returning to the stock market. They are:
This is an essential factor that influences the stock market. When the risk-on mode is high, the stock market and other risky assets boom again. A risk-off method is when investors are not willing to take risks. It is evident we are gradually returning to the bet on mode again.
Investors tend to return to less risky assets and buy government bonds when the interest rates are high. However, the recent decline in the dollar index shows investors are returning to the commodity and stock markets.
US 10-year Treasury Yield
The rise in the 10-year treasury yield has been used by analysts to measure when investors are back in risk-on mode and ready to buy stocks and Commodities. An increase in the US 10-year yield shows investors slowing down purchasing government bonds.
We can find these three factors present today, which indicate that the current bullish momentum might be prolonged.