U.S. Opening Bell: Yields, Vaccines, Stimulus Boost Stocks; Oil, Gold Slump

Key Events

Futures on the Dow, S&P and Russell 2000, as well as global stocks rebounded from Monday’s slide as rising yields put the reflation trade back on track, sending NASDAQ futures lower.

Optimism has returned to markets after US President Joseph Biden vowed that 90% of American adults will be vaccinated by Apr. 19, after the nation hit a three-day record of 10 million shots over the weekend. Biden is also expected to unveil a long-term infrastructure plan of $3 trillion on Wednesday. However, the expense has divided economists according to their left- or right-leaning ideologies.

Global Financial Affairs

The news that the tanker blocking the Suez Canal had been freed, a story which had been dominating headlines for days, was quickly overshadowed on Monday by the discovery that a broad market selloff might be in the offing as US investment firm Archegos Capital was forced to unwind massive, loosing derivative positions.

Investors initially braced for a fire sale, fearing it would spread like wild fire and cause a broader market meltdown. But the market proved resilient and investors remained steady. Given that emotional reactions have started wars and stock market crashes, Monday's trading could have turned out very differently.

In the US, Mad Money's Jim Cramer warned on Monday morning that an oversupply and lower demand for US stocks could cause market trouble, but by Monday evening, he recommended buying the dip in banks and cyclical stocks. The rebound was viewed as confidence in the economic recovery.

In Europe on Tuesday bank stocks rebounded, buoyed by rising yields—signaling higher interest rates which benefit bank profits—leading the European STOXX 600 Index to within 1% of its record.

The cyclical rotation has also reappeared in US futures, with contracts on American firms listed on the Russell 2000 up about half a percent in pre-US market open trading on Tuesday, while NASDAQ futures were half a percent lower, as of the time of writing. This follows Monday’s Wall Street session when the Russell 2000 plunged 2.6%, while the NASDAQ 100 retreated just 0.1%

Also, the sectors of the S&P 500 Index—which fell 0.1%—that were in demand on Monday were the traditionally ignored defensive shares, utilities and consumer staples. Consumer services rebounded after a selloff due to US Congress accusing Facebook (NASDAQ:FB), Google (NASDAQ:GOOGL) and Twitter (NYSE:TWTR) of encouraging children's addiction to screens. These three sectors advanced about 1%.

Japan's Nikkei 225 was not so lucky. It was flat amid the global advance, due to Nomura (T:8604) spoiling the mood, warning that it is too soon for it to estimate the potential fallout from the losses tied to Archegos Capital Management's collapse.

The 10-year Treasury yield rose as high as 1.77%, its highest since January, and the five-year rate hit its highest point since February.

The outlook for higher rates pushed the dollar up as well.

The greenback moved past Thursday’s shooting star, confirming the new uptrend following the falling wedge since the March high.

Gold fell for the second day.

Perhaps the yellow metal is resuming the dynamics of a rising, bearish flag, potentially suggesting it will provide a downside breakout to its falling channel.

Meanwhile Bitcoin rose for the second day

The cryptocurrency had provided an upside breakout to a bullish flag.

Oil gave up an advance and fell into negative territory ahead of this week’s OPEC+ meeting. Traders have been weighing whether renewed demand concerns will have the group keep reduction in check. The unblocking of the Suez Canal should not have had an impact on today’s fluctuation, as it did yesterday.

Oil attempted but failed to climb back above its uptrend line and is now struggling to remain above a potential bearish pennant—complete with a downside breakout.

Up Ahead

• President Biden is expected to unveil his infrastructure program on Wednesday.
• The EIA's crude inventory report is released on Wednesday.
• China Caixin PMI is due Thursday.
• US nonfarm payrolls for March are released on Friday.
• The Easter weekend begins on Good Friday in countries including the US, UK, France, Germany, Australia and Canada.

Market Moves

Stocks

• Futures on the S&P 500 Index decreased 0.1%.
• The FTSE 100 Index increased 0.1%.
• The STOXX Europe 600 Index gained 0.5%.
• The MSCI Asia Pacific Index dipped 0.1%.
• The MSCI Emerging Markets Index rose 0.5%.

Currencies

• The Dollar Index jumped 0.2%.
• The British pound dipped 0.1% to $1.3755.
• The euro declined 0.2% to $1.1738.
• The onshore yuan was little changed at 6.571 per dollar.
• The Japanese yen weakened 0.4% to 110.26 per dollar.

Bonds

• The yield on 10-year Treasuries rose six basis points to 1.77%.
• The yield on two-year Treasuries rose one basis point to 0.15%.
• Britain’s 10-year yield gained five basis points to 0.839%.
• Germany’s 10-year yield climbed five basis points to -0.27%.
• Japan’s 10-year yield gained two basis points to 0.091%.

Commodities

• West Texas Intermediate crude declined 0.2% to $61.41 a barrel.
• Brent crude decreased 0.2% to $64.86 a barrel.
• Gold weakened 0.8% to $1,698.31 an ounce.