U.S. Opening Bell: Futures Point To Tech Rebound; Yields Slide, USD Recovers

Key Events

US contracts on the Dow, S&P, NASDAQ and Russell 2000 took their cues from bonds on Tuesday morning and were all trading higher, ahead of a Treasury auction that may provoke market gyrations.

The dollar fell for the first time in five sessions, mirroring Treasury yields. Bitcoin advanced for the fifth straight day.

Global Financial Affairs

Futures on the NASDAQ jumped over 2%, rebounding from Monday’s 2.4% fall in the underlying index, which was pushing the tech benchmark into a 10% correction phase.

However, the opposite end of the reflation trade, represented by small caps on the Russell 2000 contract, was the second best performer, up over 1.5%, demonstrating that demand for value persists, even amid dip-buying (or short covering) for the technology heavy NASDAQ.

Either way, the point is that tech contracts recovered because yields eased, evidencing the link between the two as higher rates are seen to hurt the overvalued tech industry.

In Europe, the STOXX 600 Index was weighed down by a 1.9% sellof in miners. This followed a 10% slump in Dallian iron ore contracts, the daily limit, after the Chinese government enforced restrictions on its biggest steelmaking city, Tangshan, as part of its anti-pollution efforts. Metal prices also became more expensive as the dollar strengthened.

In the background, the slow vaccine rollout across Europe has, over the past three weeks, pushed investors to divest from the European stock market, as they worry that economic growth there could slow as a result.

Trading in Asia earlier today was mixed. Japan’s Nikkei 225 outperformed, rising just shy of a full percent, led by property companies which were considered well placed to profit from the post-coronavirus reopening. Hong Kong’s Hang Seng climbed 0.8% after the “national team,” referring to brokers linked to Chinese government-backed funds started buying up stocks to support the market there. Meanwhile South Korea's KOSPI was lower.

Starting today, the US Treasury Department is scheduled to issue $120 billion of new bonds. Three-year notes will be auctioned today and 10-year and 30-year Treasuries tomorrow. Both events will test last week’s bearish and brutal seven-year note auction. The poor result was based on the view that sudden, post-COVID-19 economic growth will overheat the economy, create inflation, triggering the Fed to increase rates.

Yields on the 10-year Treasury note fell.

The drop is seen as temporary, before rates resume along a second, steeper rising channel.

The dollar fell along with yields, after matching the number of days rates advanced.

The greenback receded from a four-month high. However, after breaking to the topside of a rising channel, the USD may find support above it. Beforehand, the currency completed a falling wedge.

Gold recovered, erasing Monday's losses.

The yellow metal bounced off the bottom of a falling channel.

Bitcoin climbed for the fifth straight day amid further signs of institutional demand.

Oil moved higher again after giving up a new high of just under $68 a barrel yesterday.

Up Ahead

• The US government auctions three-year, 10-year and 30-year Treasuries this week.
• The EIA crude oil inventory report is due on Wednesday
• The US February consumer price index will offer the latest look at price pressures on Wednesday.
• The European Central Bank holds its monetary policy meeting and President Christine Lagarde is set to hold a briefing Thursday.

Market Moves

Stocks

• Futures on the S&P 500 Index advanced 1%.
• The FTSE 100 Index increased 0.7%.
• The STOXX 600 Index climbed 0.1%.
• The MSCI Asia Pacific Index gained 0.4%.
• The MSCI Emerging Markets Index dipped 0.2%.

Currencies

• The Dollar Index was little changed at 92.03
• The British pound climbed 0.5% to $1.3888.
• The euro climbed 0.4% to $1.1889.
• The onshore yuan strengthened 0.1% to 6.517 per dollar.
• The Japanese yen strengthened 0.1% to 108.78 per dollar.

Bonds

• The yield on 10-year Treasuries fell five basis points to 1.55%.
• The yield on two-year Treasuries decreased less than one basis point to 0.16%.
• Britain’s 10-year yield declined two basis points to 0.737%.
• Germany’s 10-year yield fell two basis points to -0.30%.
• Japan’s 10-year yield increased less than one basis point to 0.127%.

Commodities

• West Texas Intermediate crude was little changed at $65.06 a barrel.
• Brent crude increased 0.1% to $68.33 a barrel.
• Gold strengthened 0.9% to $1,699.03 an ounce.