NASDAQ Index, SP500, Dow Jones Forecasts – Stocks Retreat As Oil Prices Test New Highs

From a big picture point of view, traders have started to price in a potentially long war in the Middle East. High oil prices may put significant pressure on global economy, which is bearish for stocks.

In addition, high energy prices may trigger another wave of inflation and force the Fed to be more hawkish. Not surprisingly, Treasury yields continue to move higher. The yield of 2-year Treasuries climbed towards the 3.60% level, while the yield of 10-year Treasuries moved towards 4.15%. Rising Treasury yields put additional pressure on SP500 today.

Traders also focused on the Initial Jobless Claims report, which indicated that 213,000 Americans filed for unemployment benefits in a week. The job market remains in decent shape, but traders are mostly focused on geopolitical developments and dynamics of energy markets.

Energy stocks managed to gain some ground today as traders reacted to the rally in oil and natural gas markets. Other sectors found themselves under strong pressure.

Basic materials stocks were among the biggest losers today as traders focused on pullbacks in precious metals and copper markets.

Currently, SP500 is trying to settle below the support at 6780 – 6790. In case this attempt is successful, SP500 will head towards the next support, which is located near recent lows at 6710 – 6720. RSI is in the moderate territory, and there is plenty of room to gain additional downside momentum in case the right catalysts emerge.