U.S. Opening Bell: Vaccine Progress Drives Markets Higher As Retail Revolt Eases

Key Events

Global stocks and US futures advanced on Tuesday on renewed hopes of additional US economic stimulus, momentum in the vaccination rollout program and market stabilization after the battle between retail and professional traders that began last week. Contracts on the Dow, S&P, NASDAQ and Russell 2000 continued to move higher after the underlying indices closed in the green on Monday.

Both gold and the dollar fell.

Global Financial Affairs

Yesterday, the long end of the Treasury yield curve steepened the most since 2016, a visual display of the confidence in the economic recovery, as global markets stabilized from the recent Reddit fueled onslaught on hedge funds short in GameStop (NYSE:GME) and other stocks. However, there appears to be calm for now, but considerable confusion remains in the media.

News networks reported that Monday's spike in silver prices to 10-year highs was the result of another short squeeze provoked by investors who've been dubbed the "Reddit army" because of the social media platform they've been using to egg each other on. Sure enough, everything silver spiked, including the physical commodity, options contracts, ETFs and mining stocks, as the news went viral.

Silver's performance continues to raise concerns that the wild whipsaws will spill over into the broader market and be the final catalyst for a crash.

S&P 500 contracts built on the underlying index’s 1.6% rebound on Monday from its worst drop since October. GameStop), the stock that was the spearhead of the so-called Redditt frenzy, extended its decline in pre-market trading on Tuesday.

The one constant in all this has been technology shares. The sector continues to outperform the broader market. NASDAQ 100 futures are ahead of contracts on the S&P 500 and Dow, and in Europe, the STOXX 600 Index climbed with technology shares.

The NASDAQ 100 appears to be forming a falling flag, bullish after a preceding 6.3% surge within six sessions. Its upside breakout would signal a 14,000 target.

Australia’s ASX 200 (+1.5%) led Asia-Pacific stocks higher as the Reserve Bank of Australia expanded its QE program.

On Monday, US stocks enjoyed their biggest boost in 10 weeks after analysts assuaged concerns that the spike in retail speculation will topple the market. The tech sector led the advance with the NASDAQ 100 up 2.5% ahead of Amazon (NASDAQ:AMZN) and Google (NASDAQ:GOOGL) earnings results. Tesla (NASDAQ:TSLA) jumped 5.8% after an analyst more than doubled its price target.

There seems to be headway on additional economic stimulus in the US with President Joseph Biden resuming meetings on the subject. He is reportedly keen to push it through, with or without bipartisan agreement.

The US hit a positive COVID milestone. More Americans have now received at least one dose of the vaccine than those that have tested positive for coronavirus.

US 10-Year Treasury yields completed a bullish flag.

The move signaled a resumption of the rising channel, as increasing investor confidence allows them to go back into equities.

The dollar fell.

However, the greenback found support above the neckline of a H&S bottom and falling wedge top, after breaking out of both on Monday.

Gold fell but found support at the bottom of a rising flag, bearish after the preceding plunge back into the falling channel.

On the other hand, the price of the precious metal may also be developing a H&S bottom.

Silver plunged 5.8%, paring yesterday’s 9.3% surge, after a 15.4% jump in just three days.

However, we consider it a buying dip, within a rising channel, although if that fails, it could become a double top.

Bitcoin appears to be completing a falling flag.

The cryptocurrency seems to be setting its sites on the $50,000 mark.

Oil is rising for the second day for a variety of reasons; OPEC+'s pledge and follow-through; a weak dollar; and broader market enthusiasm due to vaccine progress amid the slow down of the spread of the coronavirus.

Oil completed a falling flag, aiming for the $60 per barrel.

Up Ahead

• On Wednesday the EIA crude oil inventory report will be released.
• The Bank of England and the Indian Central Bank sets rates on Thursday.
• In the US, January nonfarm payrolls report, due Friday, will provide a first look at hiring in 2021.

Market Moves

Stocks

• Futures on the S&P 500 Index climbed 0.8%.
• The FTSE 100 Index increased 0.5%.
• The STOXX Europe 600 Index increased 1.1%.
• The MSCI Asia Pacific Index gained 1.3%.
• The MSCI Emerging Markets Index rose 1.4%.

Currencies

• The Dollar Index fell 0.3%.
• The British pound rose 0.3% to $1.3703.
• The euro fell 0.2% to $1.2081.
• The onshore yuan dropped 0.15% to 6.4572 per dollar.
• The Japanese yen strengthened 0.1% to 104.87 per dollar.

Bonds

• The yield on 10-year Treasuries gained two basis points to 1.10%.
• The yield on two-year Treasuries climbed less than one basis point to 0.11%.
• Britain’s 10-year yield jumped three basis points to 0.351%.
• Germany’s 10-year yield climbed two basis points to -0.50%.
• Japan’s 10-year yield dipped one basis point to 0.054%.

Commodities

• West Texas Intermediate crude gained 1.2% to $54.21 a barrel.
• Brent crude increased 1.2% to $57 a barrel.
• Gold weakened 0.6% to $1,849.11 an ounce.