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Opening Bell: U.S. Futures, Global Stocks Gain Ahead Of Yellen; Gold Slips

By Investing.com (Pinchas Cohen/Investing.com)Market OverviewJan 19, 2021 07:30AM ET
www.investing.com/analysis/opening-bell-us-futures-global-stocks-gain-ahead-of-yellen-gold-slips-200556287
Opening Bell: U.S. Futures, Global Stocks Gain Ahead Of Yellen; Gold Slips
By Investing.com (Pinchas Cohen/Investing.com)   |  Jan 19, 2021 07:30AM ET
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  • Signs of resurfacing “reflation trade”
  • Bitcoin benefits from weaker dollar
  • Gold remains under pressure

Key Events

US futures on the Dow, S&P 500, NASDAQ and Russell 2000, and most global equities were higher on Tuesday ahead of an expected call for the Biden administration's generous fiscal stimulus package by Treasury Secretary nominee Janet Yellen when she testifies in front of the Senate Finance Committee later today, after the US market opens.

This morning, the dollar edged lower while oil inched higher.

Global Financial Affairs

Yellen is expected to tell the Committee, at 10 ET in a prepared statement, that America must “act big,” following up on soon-to-be President Joseph Biden’s $1.9 trillion virus relief proposal announced last week.

Meanwhile there are signs in the market of a so-called “reflation trade,” in which investors expect the tremendous influx of cash from the Biden administration's aid package will finally create a catalyst for inflation, though some contest that, which has been dormant since the Recession that followed the 2008 crash.

We see this in rising yields and the moves higher in bank stocks. US dollar traders will have to weigh the dollar’s increasing innate value due to a higher payout, versus an oversupply of units deflating the value of each dollar.

Meanwhile, Bitcoin is benefiting from fears that any increase in inflation will dent the dollar’s purchasing power.

Contracts on the Russell 2000 outperformed, as it does when the cyclical rotation takes hold. However. the tech sector did not underperform, it just came in second.

In Europe on Tuesday, the STOXX 600 Index rose, driven mainly by shares in financials. The banking sector is sensitive to the economy and an expectation of rising inflation and therefore higher interest rates benefits banks.

Most Asian markets advanced this morning on the belief that China’s economic strength would carry the region. On Monday, China reported that its GDP rose by 2.3% in 2020. Although that is the weakest figure since the Mao era, it still singled out China as the only major economy to post any growth at all during the worst global health crisis in a century.

Ironically, as we often note—especially regarding China—on Tuesday its stock exchanges were the only ones in the red, with the Shanghai Composite losing 0.8% of value, while the CSI 300 Index fell 1.5%.

Hong Kong’s Hang Seng rallied 2.7% on increased demand from the mainland. MSCI's broadest gauge of Asia-Pacific stocks excluding Japan gained 1.6%, breathing on the neck of its record.

Japan’s Nikkei 225 rebounded 1.4% from yesterday’s drop. The move completed what would have been a Morning Star had it followed a downtrend. This time, however, the dip follows an uptrend. Volume has been diminishing, putting observant traders on alert for potential selling activity after the major index soared to its highest level since 1990.

Australia’s ASX 200 rose 1.2% on expectation of easing social restrictions and increase mining output.

The US market was closed yesterday in observance of Martin Luther King Day. On Friday, US stocks sold off on mixed earning results and disappointing retail sales.

The reflation trade puts yields, including on the 10-year Treasury note, on a path to repeat a move seen two weeks ago.

US Treasuries 10-year Daily
US Treasuries 10-year Daily

At that point yields broke through the top of a rising channel, jumping through a bullish flag, when the 200 DMA followed the 50 DMA as the two averages had triggered a golden cross.

The dollar was caught in the crossfire of higher yields and higher supply.

Dollar Index Daily
Dollar Index Daily

The greenback found resistance by the 50 DMA but also support upon climbing above the trendline of a falling range since Dec. 7, within a falling channel.

Gold might be facing the resistance of the top of a pennant.

Gold Daily
Gold Daily

The yellow metal is bearish after the 7.5% plunge within five sessions—falling back into a falling channel since the March high.

Bitcoin, by contrast, is the most crowded long trade, according to a Bank of America fund manager survey. The cryptocurrency was boosted by a steeper yield curve according to the reflation trade with a record $3.7 billion in Bitcoin bullish options due to expire on Jan. 29.

Bitcoin Daily
Bitcoin Daily

The digital currency is set to complete a bullish pennant, whose implied target suggests topping the $50,000 level, and even nearing $60,000.

Oil prices advanced slightly.

Up Ahead

Market Moves

Stocks

Currencies

  • The Dollar Index declined 0.1% to 90.63.
  • The euro climbed 0.3% to $1.2114.
  • The British pound increased 0.1% to $1.36.
  • The Japanese yen weakened 0.3% to 103.99 per dollar.

Bonds

  • The yield on 10-year Treasuries climbed two basis points to 1.11%.
  • The yield on two-year Treasuries gained less than one basis point to 0.14%.
  • Germany’s 10-year yield advanced one basis point to -0.52%.
  • Britain’s 10-year yield gained one basis point to 0.296%.

Commodities

  • West Texas Intermediate crude advanced 1%.
  • Gold strengthened 0.2% to $1,844.64 an ounce.
Opening Bell: U.S. Futures, Global Stocks Gain Ahead Of Yellen; Gold Slips
 

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Opening Bell: U.S. Futures, Global Stocks Gain Ahead Of Yellen; Gold Slips

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Comments (5)
Abel Loya
Abel Loya Jan 19, 2021 8:23AM ET
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P&G results the worst ever and seek PFE to obtain gains .Fed its just more inflation whit that stimulus package...
ridzuan jalil
ridzuan jalil Jan 19, 2021 8:08AM ET
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stock market up and down..up and down..its normal..eventhou u said it will sank..its the same went last year many of us said..market will be crash dow jones will be bottom less then 5000 point...but....hey !!...its not happening..so my advice is stay focus with rational mind and be smart to your trading plan..
David Heiser
David Heiser Jan 19, 2021 8:05AM ET
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So no reflection of having a Fed person actually in the government? So no writing about how having sn incestuous relationship with the fed is bad?
Pinchas Cohen
Pinchas Cohen Jan 19, 2021 8:05AM ET
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Nope
Tana Tan
Tana Tan Jan 19, 2021 7:38AM ET
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Stocks will face worst crash soon
Abdelraziq Abuaisha
Abdelraziq Abuaisha Jan 19, 2021 7:17AM ET
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Gold will go up like it has never before, gold is buying, all other bubbles are to burst. We are nearing the end, no way to escape the economic collapse, just buy gold, silver and copper. Happy and soft collapse :)
Show previous replies (6)
Pinchas Cohen
Pinchas Cohen Jan 19, 2021 7:17AM ET
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Abdelraziq Abuaisha  Well, if it's going to be as bad that you're concerned contracts won't be honored, you might consider ammunition to protect that real silver and gold.
Abdelraziq Abuaisha
Abdelraziq Abuaisha Jan 19, 2021 7:17AM ET
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It’s bad to the degree we won’t read to writers who write about some banks making moves, and then tell people that these moves were made by real investors, anymore :)
John Poor
John Poor Jan 19, 2021 7:17AM ET
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hello
John Poor
John Poor Jan 19, 2021 7:17AM ET
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hey
John Poor
John Poor Jan 19, 2021 7:17AM ET
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I need you're money form you sir thank you for replying me
 
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