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Opening Bell: Stocks Weaken Ahead Of Fed; Treasury Yield Curve Flattens

By Investing.com (Pinchas Cohen/Investing.com)Market OverviewNov 02, 2021 08:56AM ET
www.investing.com/analysis/opening-bell-stocks-weaken-ahead-of-fed-treasury-yield-curve-flattens-200607068
Opening Bell: Stocks Weaken Ahead Of Fed; Treasury Yield Curve Flattens
By Investing.com (Pinchas Cohen/Investing.com)   |  Nov 02, 2021 08:56AM ET
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  • Russell 2000 futures outperformed
  • Markets await US tapering
  • Bitcoin recovers

Key Events

On Tuesday, US contracts on the Dow, S&P, NASDAQ and Russell 2000 were mixed ahead of the US session and shares in Europe declined as the global supply chain quagmire deepened and China introduced new coronavirus restrictions. In an attempt to resolve the supply chain constraints US President Biden called on global leaders to try and diversifying the supply chain ecosystem to avoid additional disruptions to commerce across the globe.

The Treasury yield curve flatted ahead of the Federal Reserve's monthly policy meeting.

Global Financial Affairs

Futures on the S&P 500 and NASDAQ were in the red while Dow and Russell 2000 futures were trading higher. On Monday, the small cap Russell 2000 surged 2.6% during Wall Street trade; the tech-heavy NASDAQ was the second best performer, adding just 0.6%.

In Europe, shares fell from record levels led by miners, pressured by a slump in iron ore prices. The STOXX 600 Index fell out of the gate this morning after closing at a record high yesterday following strong corporate results and a jump in bank stocks as expectations increase that the European Central Bank will raise rates.

Trading in Asia was mostly lower, with Japan's Nikkei 225 losing 0.4% and Australia's ASX slipping 0.6%. China's Shanghai Composite declined 1.2%, after social restrictions were introduced there due to an increase in coronavirus cases. Hong Kong's Hang Seng slid 0.1% while South Korea's KOSPI was the only bright spot, gaining 1.1%.

Bond and foreign exchange traders are bracing ahead of the two-day Fed meeting which starts today. It is widely anticipated the US central bank will announce the first step in the reduction of its stimulus program. On the other hand, equity traders appear to be fixated on corporate earnings and are mostly ignoring macroeconomics.

The Treasury yield curve flattened after earlier steepening, as 2-year yields plunged 2.3 basis points. Yields are see-sawing between inflation worries about and lower growth prospects due to labor shortages and supply-chain disruptions. Inflation concerns appear to be winning.

10-Year Vs. 2-Year Daily
10-Year Vs. 2-Year Daily

The move narrowed the gap to 10-year Treasury yields which declined by less than one basis point.

The dollar wavered but is currently holding steady.

Dollar Index Daily
Dollar Index Daily

The greenback is being squeezed between the long-term uptrend and the short-term downtrend, clearly defined by the rising and falling channels.

Gold is also flat.

Gold Daily
Gold Daily

The precious metal is attempting to hold on to its short-term uptrend, a return-move to a weekly H&S continuation pattern.

Bitcoin rallied for the first time in four sessions.

Bitcoin Daily
Bitcoin Daily

The cryptocurrency is within a potential small H&S bottom.

Oil fluctuated between gains and losses.

Up Ahead

Market Moves

Stocks

  • The STOXX 600 fell 0.2%
  • Futures on the S&P 500 were little changed
  • Futures on the NASDAQ 100 fell 0.1%
  • Futures on the Dow Jones Industrial Average were little changed
  • The MSCI Asia Pacific Index fell 0.2%
  • The MSCI Emerging Markets Index was little changed

Currencies

  • The Dollar Index was little changed
  • The euro was little changed at $1.1603
  • The Japanese yen rose 0.3% to 113.65 per dollar
  • The offshore yuan was little changed at 6.3944 per dollar
  • The British pound fell 0.1% to $1.3649

Bonds

  • The yield on 10-year Treasuries was little changed at 1.56%
  • Germany's 10-year yield declined two basis points to -0.12%
  • Britain's 10-year yield fell two basis points to 1.04%

Commodities

Opening Bell: Stocks Weaken Ahead Of Fed; Treasury Yield Curve Flattens
 

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Opening Bell: Stocks Weaken Ahead Of Fed; Treasury Yield Curve Flattens

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Comments (4)
frendy glasser
dejong099 Nov 02, 2021 9:10AM ET
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small caps have been surging as of late, this was the first article I've seen that even mentioned it.  I looked at the components of the Russell 2000 trying to see which shares were driving it.  I didn't see an outsized gain by any one stock (like a meme).  It is curious though:  supply chain issues, inflation, product shortages, inability to hire staff, rising staff costs.  One would think they would hurt small caps the most.? Alas, no point in arguing with the tape or trying to explain it.  Just ride the wave until it reverses.
Pinchas Cohen
Pinchas Cohen Nov 02, 2021 9:10AM ET
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Dejong, the larger a company, the harder it is to maintain the same rising growth shareholders come to expect. Multinationals have a lot more to lose than small caps.
Mohamed bundu Koroma
Mohamed bundu Koroma Nov 02, 2021 8:56AM ET
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is this thing real
Andy Huang
Andy Huang Nov 02, 2021 8:46AM ET
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Thanks
Kim Boesgaard Lauritsen
Kim Boesgaard Lauritsen Nov 02, 2021 8:03AM ET
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thanks Pinchas, Hope that you Will have a great day at the markets
Pinchas Cohen
Pinchas Cohen Nov 02, 2021 8:03AM ET
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Thanks, you too KIM!
 
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