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US Markets Retreat as Tariff Jitters Resurface
On Thursday, February 20, US equity markets ended the session in negative territory amid renewed concerns about US tariffs. The Dow dropped by 1.01%, while the Nasdaq Composite Index and the S&P 500 saw losses of 0.47% and 0.43%, respectively.
Trump’s plans for sweeping tariffs on autos, chips, and pharmaceuticals raised concerns about inflation, reinforced by Wednesday’s FOMC Meeting Minutes.
Meanwhile, Walmart (WMT) plunged 6.55% after weaker-than-expected revenue, impacting sentiment toward the consumer sector.
Key Focus: US Services PMI in Focus
On Friday, February 21, the US services sector will be in focus. Economists forecast the S&P Global Services PMI to increase from 52.9 in January to 53.0 in February.
A higher PMI reading could further weigh on Fed rate cut expectations, potentially impacting risk assets. However, employment and price trends will also draw interest. Faster job creation and rising prices would signal a higher inflation outlook, potentially sinking bets on an H1 2025 Fed rate cut.
Conversely, a lower PMI, weaker employment, and softer prices may revive expectations of a near-term Fed move.
Near-Term Outlook
The DAX’s direction hinges on the private sector PMIs and central bank guidance.
- Weaker PMI readings and dovish central bank signals could push the DAX toward 22,500.
- Strong PMIs and a hawkish Fed may drag the Index toward 22,000.
US trade policies and geopolitical tensions remain critical risk drivers. Rising US-EU tensions could affect demand for export-driven German stocks. However, any positive trade developments could support further DAX gains.
As of Friday morning, futures indicated a cautious start ahead of the German elections and crucial data. DAX futures fell 25 points, while the Nasdaq 100 mini dropped 2 points.
DAX Technical Indicators
Daily Chart
Despite this week’s retreat, the DAX remains well above the 50-day and 200-day Exponential Moving Averages (EMAs). Despite holding above key moving averages, increased volatility signals potential short-term downside risks within the broader uptrend.
A return to 22,500 could signal a move toward the February 19 record high of 22,935. A breakout from 22,935 may enable the bulls to target 23,000 next.
Conversely, if the DAX drops below 22,150, the bears could target the 22,000 level next.
With the 14-day Relative Strength Index (RSI) at 63.05, the DAX may climb to the record high of 22,935 before entering overbought territory (RSI higher than 70).
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