The big US benchmarks are down again today after closing the first week of the New Year in the red last Friday.
Halfway through the session, the Dow Jones Industrial Average is down roughly 077%, the S&P 500 is off near 0.38%, while the Nasdaq Composite sank around 0.17% after earlier gains.
During Thursday’s session, the Dow dropped 0.48%, or 175 points, the S&P dipped 1.42%, while the Nasdaq went 2.51% lower.
Banking and high inflation
A number of banks issued earnings reports today. During the first half of trading, banking stock is mostly down despite their potential upside in the current US economy.
In an interview with Caital.com, David Russell, VP of Market Intelligence at TradeStation Group, said, “Investors think banks will benefit from inflation because it can push up long-term rates and steepen the yield curve to increased profits.”
“Investors make their profits from the difference between short term rates they pay the depositors and the long-term rates in which they lend,” he continued. “As wages go up, the credit quality also gets better as people are more able to pay their debts.”
“Banks trade at low price to earnings multiples, and when rates increase, investors prefer lower multiple stocks,” said Russell.
Citigroup is down near 1.79% after showing fourth quarter revenues reaching $17bn, while JPMorgan is approximately 5.15% lower following an earnings report showing fourth quarter revenues of $20.93bn.
Winners & losers: Vax makers
Oil: Targets fourth week
Oil futures are up on Friday with West Texas Intermediate crude for February delivery rising five cents, or 0.1%, to $82.17 a barrel on the New York Mercantile Exchange, while March Brent crude, the global benchmark, added 21 cents, or 0.2%, at $84.68 a barrel on ICE Futures Europe.
Gold: Metal rallies
Gold futures are higher as February gold was trading $1.30, or nearly 0.1%, higher at $1,822.70 an ounce, following a 0.3% dip on Thursday.
Crypto: Digital assets stirred
Forex: Yields up, dollar slips
On Friday, one US dollar equals $1.25 of the Canadian dollar, $0.87 of the euro, and $0.73 of the Pound sterling.
The yield on the benchmark 10-year Treasury note went up to 1.761% Friday, from 1.708% Thursday.
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.