U.S. Opening Bell: Markets Await Key Inflation Data, Earnings; Oil Slips

• Markets are looking for direction
• Falling Treasury yields drag on the dollar
• Gold rallies

Key Events

European stocks and futures on the Dow, S&P, NASDAQ and Russell 2000 were slightly higher ahead of the open on Wall Street on Wednesday as traders await key US inflation data and today's corporate earnings releases in the hope they will provide some clarity on future economic growth. Markets have been struggling on worries that higher inflation driven by hikes in energy prices as well as supply chain bottlenecks will dent the current recovery. 

Oil slid after its recent run-up.

Global Financial Affairs

At the time of writing, futures on the NASDAQ were outperforming followed by contracts on the Russell 2000, while contracts on the S&P 500 and Dow Jones Industrial Average were almost flat.

On Monday, we pointed out some of the current market contradictions as stocks were trading lower on concerns that inflation will slow the recovery, but sectors that benefit from economic growth were outperforming. Yesterday, the market briefly made sense again. However, today, it seems that investors are feeling lost, as they are bidding up the opposite sides of the reflation trade—value stocks listed on the Russell 2000 and growth stocks listed on the NASDAQ.

Apple (NASDAQ:AAPL) shares extended a selloff in the premarket on a report that the tech giant may have to cut iPhone 13 production due to the global chip supply shortage resulting from supply chain issues.

However, in Europe, strong earnings guidance from software giant SAP (DE:SAPG) helped push Germany’s DAX higher. The stock advanced 5% after increasing its full-year outlook for the third time following solid quarterly results, thanks to the continued trend of shifting IT operations to the cloud in a world that now embraces remote working.

German bond yields on the 10-year note reached 5-month highs ahead of US inflation data that may provide some clues on the Fed’s path to higher interest rates.

Meanwhile, yields on US 10-year Treasuries fell for the second day, back below 1.6% and the chart suggests that they will likely move even lower.

10-year Treasuries Daily

The recent risk-off pushed investors back into Treasuries, weighing on their payouts. Yesterday, yields slumped, erasing more than two days of gains and completing an exceptionally bearish Evening Star.

The decline in yields dragged the dollar lower, reversing yesterday’s gains and then some. 

Dollar Index Daily

The selloff pushed the greenback back into a bullish triangle.

USD weakness, compounding risk-off pushed gold higher for the second day in a row.

Gold Daily

We continue to monitor the H&S bottom, making up the right shoulder of an even larger H&S bottom. A close above 1,780 may provide bulls with the juice to go for broke.

Bitcoin fell for the second day.

Bitcoin Daily

The cryptocurrency may be developing a short-term H&S on its intraday chart.

Oil fell for the first time in five days but managed to remain above $80, supported by a global supply crunch.

Oil Daily

The current trading appears to suggest tired traders after a considerable bull run. The price has been unable to overtake Monday’s high, in the form of a bearish Shooting Star, whose negative outlook is strengthened when the shooting star itself found resistance by the top of a rising channel. Momentum too has been hiccupping, as the RSI forms a H&S top. Profit taking may test the channel bottom at $78.

Up Ahead

• On Thursday, US initial jobless claims are published. 
• Crude oil inventories are printed on Thursday.
• US retail sales figures are released on Friday. 

Market Moves

Stocks

• The FTSE 100 was lower by 0.1%
• The STOXX 600 was up 0.4%
• Futures on the S&P 500 were were up 0.2%
• Futures on the NASDAQ 100 rose 0.5%
• Futures on the Dow Jones Industrial Average were little change
• The MSCI Asia Pacific Index was little changed
• The MSCI Emerging Markets Index rose 0.4%

Currencies

• The British pound rose 0.2% to $1.3621
• The Dollar Index fell 0.1%
• The euro rose 0.2% to $1.1551
• The Japanese yen was little changed at 113.57 per dollar
• The offshore yuan slid 0.1% to 6.4463 per dollar

Bonds

• Britain’s 10-year yield declined two basis points to 1.13%
• The yield on 10-year Treasuries was little changed at 1.57%
• Germany’s 10-year yield declined two basis points to -0.10%

Commodities

• WTI crude fell 0.5%
• Spot gold rose 0.3% to $1,765.20 an ounce