A pullback in the dollar, as well as an easing in Treasury bond yields, is giving investors an opening to buy U.S. stocks following the Dow’s slide into bear market territory last night.
U.S. equity futures powered higher Tuesday, potentially snapping Wall Street’s five-day losing streak, while the dollar retreated from its two-decade high amid a modest rebound in global stocks.
The U.S. dollar index, which tracks the greenback against a basket of six global currencies, was marked 0.4% lower in overnight trading as investors lifted global stocks from a two-year trough following last night’s slump into bear market territory for the Dow Jones Industrial Average.
In what could be a relief rally following five days of declines, as well as a 7.6% September pullback for the S&P 500, stocks in Europe and Asia booked modest gains as currency markets stabilized and the pound recovered nearly 5% from the historic lows it reached against the dollar earlier this week.
With few key data releases this week ahead of the PCE Price Index on Friday, and only two bluechip earnings reports — both expected on Thursday — to guide markets in the near-term, traders and investors are likely to focus on the dollar’s day-to-day movements, as well as a resurgence in the CME Group’s key volatility gauge, for broader direction.
The Vix index, in fact, was marked 4% higher in overnight trading at 31.12 points, around 3 points south of its recent mid-June peak.
Benchmark 2-year Treasury note yields also eased alongside the dollar, falling to 4.211% in overnight trading following a weaker-than-expected auction of $43 billion in new notes yesterday afternoon.
Stocks Rebound, Powell, Pound, Starbucks and Hurricane Ian In Focus – Five Things To Know
Oil prices were also active, rising from their lowest closing levels in more than nine months, as the dollar retreated and traders looked to next week’s OPEC meeting in Vienna and the possibility of production cuts to support beaten-down prices.
Drillers in the Gulf of Mexico have also moved to evacuate workers from key installations as Hurricane Ian accelerates its path towards the west Florida coast.
The broader Gulf region, which accounts for around 15% of U.S. crude output and 5% of its natural gas production, has been spared from serious storm concerns so far this year amid one of the quietest hurricane seasons in decades.
BP plc and Chevron (CVX) – Get Chevron Corporation Report said late Monday that they have begun removing all personnel from a total of four platforms in the Gulf of Mexico ahead of Hurricane Ian’s advance, a move that could disrupt the production of around 500,000 barrels of oil per day.
WTI futures for November delivery were marked $1.02 higher at $78.73 per barrel in overnight trading, while Brent contracts for the same month rose $1.31 to $85.37 per barrel.
In currency markets, pound rebounded from the historic lows it reached against the dollar on Monday, but remains firmly in the sights of foreign exchange traders even after a late-hour statement of potential support from the Bank of England.
The dollar-pound exchange rate, known by currency traders as ‘cable’, has gained nearly 5% since hitting its 1.0325 trough on Monday and was last pegged at 1.0810 in early London dealing.
In Europe the region-wide Stoxx 600 was marked 0.6% higher in early Frankfurt trading while Britain’s FTSE 100, whose major constituents earn the bulk of their revenues outside of the United Kingdom, fell 0.16%.
On Wall Street, futures contracts tied to the S&P 500 are indicating a 45 point opening bell gain ahead of durable goods data for the month of August at 8:30 am Eastern time and new home sales figures at 10:0 am Eastern time.
Contacts tied to the Dow Jones Industrial Average are priced for a 300 point advance after slumping into bear market territory last night, while those linked to the tech-focused Nasdaq are indicating a 165 point move to the upside.
Tesla (TSLA) – Get Tesla Inc. Report shares were the most active name in pre-market trading, rising 2.25% following a report suggesting executives are preparing for a ‘high volume’ of last minute deliveries that could close out a record quarter for the clean-energy carmaker.
