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Opening Bell: U.S. Futures, Global Stocks Fall As V-Shaped Recovery Hopes Fade

By Investing.com (Pinchas Cohen/Investing.com)Market OverviewJun 15, 2020 06:40AM ET
www.investing.com/analysis/opening-bell-us-futures-global-stocks-fall-as-vshaped-recovery-hopes-fade-200527701
Opening Bell: U.S. Futures, Global Stocks Fall As V-Shaped Recovery Hopes Fade
By Investing.com (Pinchas Cohen/Investing.com)   |  Jun 15, 2020 06:40AM ET
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  • US futures signaling underlying indices could see severe selling during NY session
  • WTI struggles to stay above $35
  • Gold falls, along with the dollar and stocks

Key Events

As the trading week opened on Monday, US contracts for the Dow Jones, S&P 500, NASDAQ and Russell 2000, along with European shares, were all sold off, on signs of a second wave of the COVID-19 pandemic invalidating recent optimism of an immediate and sustainable economic rebound.

The dollar pulled back from a two-day advance and oil struggled to remain above $35.

Global Financial Affairs

Concerns over a second wave have been ramping up since late last week, with new, confirmed cases of coronavirus now also being reported in China, ground zero for the pandemic. As well, May Industrial Production and Retail Sales data from Beijing earlier today disappointed—demonstrating that the impact of COVID-19 continues to leave its mark on the world's second largest economy. 

Futures on all four main US indices, at both ends of the spectrum—from mega to small cap—were down from the get-go some in -3% territory, though losses have reversed somewhat at time of writing. Nevertheless, US contracts remain deeply in the red.

The Stoxx Europe 600 Index was down 2.3%, extending the selloff since June 5 to 7.8%.

Asia-Pacific markets all traded lower too, with South Korea’s KOSPI seeing its deepest plunge since later March, (-4.8%). Japan's Nikkei 225 was also pressured significantly, (-3.47%).

Though US equity markets trimmed half of Thursday's losses on last week's final day of trade, they still suffered their worst decline in 12 weeks. Friday's rebound was driven by cruise company and airline shares, segments that were hardest hit during the previous day's selloff. Nevertheless, the fact that equities ended the week lower overall indicates the strength of the worries surrounding the renewed outbreak of coronavirus cases.

As such, today's market reaction is a stark reminder that investor emotions are unpredictable, which often makes linear analysis ineffective. Just because certain causes have been attributed to specific outcomes doesn't mean a similar result will occur the next time, even if spurred by the same catalyst. 

The narrative now making the rounds, that the current selloff is due to Fed Chair Jerome Powell’s warning last week of a protracted recession, compounded by second wave concerns, is a perfect case in point. The Fed boss, along with a variety of economic and global health organizations, sounded the same alarms weeks and even months ago, but markets still exuberantly pushed higher. So, what changed?

Could it be that valuations are now more elevated since stocks are 15% higher than they were a month ago, after bouncing up 30% from March lows? While, that may certainly be part of the reason, we find it difficult to accept as the primary driver. After all, it's not as if we've seen a gradual slowdown of the advance.

Rather, there's been a sudden, sharp selloff. Our best guess—and it’s only just a guess right now—after much of the financial media endlessly focused on a “V-shaped recovery” investors started accepting the notion as a foregone conclusion. Of course, that's an attitude market participants should never, ever assume. Signs of the pandemic's second wave only served to drive home the point that the reality might just be different than fanciful hopes.

Yields, including for the 10-year Treasury, opened sharply lower today.

UST 10Y Daily
UST 10Y Daily

They're nearing the flattish uptrend line since April 21, with the MACD signaling that they’ll likely break through and continue lower.

The dollar retreated after heading higher over the course of the final two days of trade last week. 

DXY Daily
DXY Daily

This has left the MACD wanting for more, as it tries to turn its journey into a bullish signal. However there's considerable resistance looming above, in the form of a completed bearish pattern and all three major MAs.

Gold has fallen for a second day—despite the dollar weakness and an equity selloff.

Gold Daily
Gold Daily

Technically, the price of the precious metal may be forming a falling flag, providing fresh energy to carry prices out of the range in place since April 14.

Oil has been struggling to stay above $35, as it falls for a third straight day.

Oil Daily
Oil Daily

WTI could potentially be developing a H&S top.

Up Ahead

  • Policy decisions from the Bank of Japan, Bank of England and the Swiss National Bank are due this week.
  • The CBOE plans to reopen its trading floor, which has been electronic-only since March 16.
  • Federal Reserve Chairman Jerome Powell delivers his semi-annual testimony to Congress on Tuesday.

Market Moves

Stocks

  • S&P 500 futures fell 2.2%.
  • Japan’s Topix was down 2.5%.
  • Hong Kong’s Hang Seng fell 2.2%.

Currencies

  • The yen rose 0.2% to 107.22 per dollar.
  • The euro was down 0.2% at $1.1236.
  • The Dollar Index fell 0.2%.

Bonds

  • The yield on 10-year Treasuries fell about five basis points to 0.65%.

Commodities

  • West Texas Intermediate crude dropped 4.5% to $34.65 a barrel.
  • Gold was down 0.5% at $1,721 an ounce.
Opening Bell: U.S. Futures, Global Stocks Fall As V-Shaped Recovery Hopes Fade
 

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Opening Bell: U.S. Futures, Global Stocks Fall As V-Shaped Recovery Hopes Fade

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Comments (9)
Ryan Grandinetti
Ryan Grandinetti Jun 16, 2020 2:10AM ET
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up 1000+ today, good retail #'s & Trumps Policing executive order
Irvin Mermelstein
Irvin Mermelstein Jun 16, 2020 2:10AM ET
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These rallies are predictable. Up in the AM, down the rest of the day.
djavid hosseini
djavid hosseini Jun 15, 2020 10:11AM ET
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So you saying , we goin down and down !?
Pinchas Cohen
Pinchas Cohen Jun 15, 2020 10:11AM ET
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No. First, I don't know what will happen. Second, even if it does go down, it never goes down and down. It goes down and up, then down and up again. Finally, as of now I'm waiting to see if the April highs - then, lows - hold. If not, I'll be looking to the March lows. Only if those break, will I expect a deeper plunge.
Coin Flipper
Coin Flipper Jun 15, 2020 9:27AM ET
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It's funny how the news media keep spewing forth the same "predictive causality" bullcrap headlines as if it's related to the stock market. Next time the world goes into a utopia and everything goes smooth, they'll say "The market is down 3% as investors fear a Nibiru planet striking earth 100 years from now". The market is cyclical, enough said, no need for speculative reasoning, that this or that or your grandma farting caused the market to fall.
Dilip Kumar Pramanik
Dilip Kumar Pramanik Jun 15, 2020 9:18AM ET
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so bulls have become bears
Pinchas Cohen
Pinchas Cohen Jun 15, 2020 9:18AM ET
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Overall and in the given moment.
Youngwealth Richworld
Youngwealth Richworld Jun 15, 2020 8:35AM ET
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Corona virus is clearly a controlled mental slavery
Trumpster Rocks
Trumpster Rocks Jun 15, 2020 8:14AM ET
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More political hate for the Nwo imho... Who can believe anything coming out of China ? They lied for 6 wks about their virus did they not? And the WHO is their puppet.. This is just an excuse to bring down the markets some nothing more here..imnsho...
Youngwealth Richworld
Youngwealth Richworld Jun 15, 2020 8:14AM ET
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Its very clear that its a plandemic virus Best u can do is to make ear mask for fake news and ear hole
Trumpster Rocks
Trumpster Rocks Jun 15, 2020 8:14AM ET
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Youngwealth Richworld  it's only clear if you listen to the State Run Media which owns at least 90% of the air waves Morry. Wake up Hillary...Comey is calling for you again.
Parimal Shah
Parimal Shah Jun 15, 2020 7:59AM ET
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wonderful Mike mahony
Bobby Bucklew
Bobby Bucklew Jun 15, 2020 7:56AM ET
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good summary thanks
Mike Mahony
Mike Mahony Jun 15, 2020 7:51AM ET
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next free fall....optimism gone....second wave....wow how about the riots? how about trade war? whats next? another scam:  stockmarket new highs?  or new lows? ahhhhh Vaccine is underway!   but that will be only in news once the stockmarket reach new lows! another optimism comes...lol   what a game show!
Pinchas Cohen
Pinchas Cohen Jun 15, 2020 7:51AM ET
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The riots have no seeming impact on stocks. Investors don't focus now on trade war. Yes, and it's the the game show with the biggest prizes - and losses - on the planet.
Parimal Shah
Parimal Shah Jun 15, 2020 7:51AM ET
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wonderful
Pietro Rosato
Pietro Rosato Jun 15, 2020 7:51AM ET
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Don't forget about the infamous China trade deal that Kudlow said was all done and the US was going to implement it at a time of their choosing. Now China talks for Phase 1 are again happening... hmmm Honestly you can't make this up.
Trumpster Rocks
Trumpster Rocks Jun 15, 2020 7:51AM ET
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Pietro Rosato  China caused the virus lied about it for 6 wks and now the left are vilanizing you if you call it the China virus . Saying you 're R't if you say the truth... Who in their right mind could ever vote Democrout again?
 
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