Opening Bell: U.S. Futures Slip, Global Markets Rally On Fed Backpedal; Earnings

Key Events

On Tuesday, US contracts on the  Dow Jones, S&P 500, NASDAQ and Russell 2000 all slid, even as European shares opened higher after a rally in Asia and a strong US session yesterday. It seems some US policymakers have put the brakes on the path to higher interest rates which has calmed global markets.

The oil price moved into negative territory. 

Global Financial Affairs

Part of the newfound optimism is due to the step back by Fed members. San Francisco Fed Chief Mary Daily urged a gradual shift in policy rather than tightening too quickly, as markets still face risk, including the ongoing global pandemic. While Kansas City Fed President Esther George calmed investors when she said that it is in "no one's interest to try to upset the economy with unexpected adjustments."

Interestingly, Asian and European investors were positively influenced by the comments, increasing risk, whereas US futures remained more cautious, sliding slightly.

Another US theme that seems to be encouraging overseas investors more than domestic ones is the ongoing strong results from US corporates. 81% of the 174 companies that have posted results so far this earnings season have at least met, if not beaten, analysts' expectations.

In Europe, the STOXX 600 Index opened higher and extended its advance to as much as 1.31%, then pared gains to 0.83%.

The pan-European benchmark reached a 12-day high, following its worst month since late 2020. The index may be forming a rising flag, bearish after the preceding sharp drop, which would help bears push the all-European gauge into a double top.

Swiss bank, UBS (SIX:UBSG) jumped 6%, to its highest level since February 2018, outperforming the region after it posted the most robust annual profit since 2006. 

Stocks in Asia rose, tracking gains in the US. Markets in China, Hong Kong, and South Korea are closed due to holidays.

Since March, Treasury yields on the 10-year note have slipped within their symmetrical triangle after completing a much larger one.

An upside breakout is likely to weigh on stocks, as rising rates render stock prices too expensive, and the secure payout of bonds will provide a more attractive alternative to investors.

The dollar fell, tracking yields.

The greenback is falling from the top of its rising channel as it tests the short-term downtrend line it broke through last week.

Gold climbed for the second day in a mirror image of the dollar.

The yellow metal may rise toward the top of its triangle when traders have the choice of falling back down within the pattern or providing an upside breakout. Considering the top of the triangle, or the downtrend line, is much longer, we'll bet on a downside breakout of the bottom of the triangle or short-term rising trendline.

Bitcoin retreated from an intraday high that surpassed the $39,000 level.

Technically, the digital coin found resistance by the top of a rising flag, bearish after the preceding sharp drop, the breakout of a prior, rising flag. That continuation pattern was the return move to an H&S top since Aug. If that reversal pattern's implied target is realized, it will complete a much larger double-top since February. And if that implied target is achieved, Bitcoin will find itself in multi-year lows.

Oil gave up on gains and fell into a decline, perhaps on expectations that OPEC+ will ratify a supply hike, even as the organization and its allies struggle to deliver all the additional production to a tightening market.

From a technical perspective, oil managed to barely close above the highs of the reversal island almost two weeks ago, after three failures. Also, after reaching the top of an asymmetrical supply-demand balance, in which buyers are not as eager as sellers, the price may return toward its bottom, in the $70 area.

Up Ahead

• Alphabet (NASDAQ:GOOGL) reports earnings after the market closes on Tuesday
• The European Central Bank announces its rate decision on Thursday
• US initial jobless claims are reported on Thursday

Market Moves

Stocks

• The STOXX 600 rose 1.1%
• Futures on the S&P 500 rose 0.1%
• Futures on the NASDAQ 100 rose 0.3%
• Futures on the Dow Jones Industrial Average rose 0.2%
• The MSCI Asia Pacific Index rose 0.3%
• The MSCI Emerging Markets Index rose 0.4%

Currencies

• The Dollar Index fell 0.2%
• The euro rose 0.4% to $1.1278
• The Japanese yen fell 0.4% to 114.61 per dollar
• The offshore yuan was little changed at 6.3672 per dollar
• The British pound rose 0.44% to $1.3505

Bonds

• The yield on 10-year Treasuries was little changed at 1.78%
• Germany's 10-year yield fell to -0.013%
• Britain's 10-year yield slid to 1.27%

Commodities

• WTI crude fell 1.02% to $87.24 a barrel
• Brent crude plummeted 0.09% to $89.18 a barrel
• Spot gold rose 0.6% to $1,807.43 an ounce