U.S. Opening Bell: Futures, Stocks Rebound; Bitcoin Slips Below $30K

Strong earnings results from corporates that outperform during economic expansion helped US futures on the Dow, S&P, NASDAQ and Russell 2000 and European stocks rebound on Tuesday after Monday's selloff.

The dollar was also trading in the green even as gold and silver were rising.

Global Financial Affairs/h2

After a rout yesterday during which investors focused on inflation and the spreading Delta variant of COVID-19, while disregarding dovish Fed rhetoric as well as strong earnings, investors, it seems, dug deep and have found new faith in the recovery.

We noted on Sunday that investors were consistent over the weekend and decided to pay attention to actual data and disregard the promise of continued stimulus—perhaps for the first time in a very long while. We were surprised they hadn't considered positive earnings as an optimistic signal and posited they might be concerned that rising inflation and the spread of the coronavirus would undo previous corporate profitability.

It seems, however, that investors have now returned to their old ways and are not willing to remain on the sidelines of what they consider an ongoing rally, irrespective of the economy.

Futures today demonstrate that the reflation trade is back. Contracts on the Russell 2000—whose listed domestic firms suffered the most during COVID-19 restrictions and therefore arguably provide the most value for a restarting economy—were outperforming, while NASDAQ 100 contracts, mega cap tech firms that profited the most during lockdowns and are therefore overvalued, lagged.

The STOXX 600 Index ended a four-day selloff, rising on Tuesday with commodity producers, which usually perform well amid a growing economy.

UBS Group (SIX:UBSG), trading on the Swiss stock exchange, surged 4.6% after posting better-than-expected results as it benefited from a jump in new assets and fee income, although the stock slipped back as management warned it foresees reduced client activity.

Switzerland’s largest bank is popular today, but underlying technical forces suggest bulls will have to prove themselves.

While the stock jumped back above the neckline of a top, it did so with muted volume, while previous down-days had spiking volumes. As of now, the stock is trading within a peak-and-trough downtrend.

Volvo's (ST:VOLVb) second quarter results slightly missed expectations. The Stockholm-based car maker’s output has been disrupted due to the global chip shortage. The stock sold off as much as 4.7% and settled 3.2% lower, as of the time of writing.

Today’s selloff completed a large H&S top, in place since early January.

Earlier today, Asian stocks remained enmeshed in yesterday’s global selloff. However, during the session, investor views seemed to flip, paring losses.

Concerns that the Delta variant of COVID-19 will disrupt the economic rebound—which global central banks have been carefully nurturing—were still dominant in the Asian session. Japan is feeling the effects of the resurgence of the virus as the Olympic games in Tokyo are set to start on Friday. Only 22% of the population there are fully vaccinated, possibly one of the reasons for the spread.

Japan’s Nikkei 225 underperformed the major regional benchmarks, falling 1%. On the other side of the vaccine rollout-spectrum, China, which has been vaccinating 20 million people a day and has video showing Malaysian police destroying over 1,000 mining rigs went viral.

The cryptocurrency traded at the lowest since Jan. 1, as red days are hit with spikes in volume, following a Death Cross less than a month ago.

Oil failed to come back, having dropped to an 8-week low after yesterday’s broad market rout. The selloff was exacerbated by OPEC’s elevated output targets. There are concerns about future demand as the Delta variant continues to spread across the globe.

WTI found support at the apex of a symmetrical triangle, reinforced by the 100 DMA, whose implied target has already been reached. Given, that most of the small H&S top has also been realized, this would be an ideal long position for contrarian dip buyers. Most other traders, however, would be cautious, as the price fell below its uptrend line.

Up Ahead/h2

• European Central Bank rate decision is announced on Thursday.
• Bank Indonesia rate decision Thursday
• On Thursday, US existing home sales figures are released.
• On Friday US manufacturing and services PMI are published.

Market Moves/h2

Stocks/h3

• Futures on the S&P 500 rose 0.6%
• Futures on the NASDAQ 100 gained 0.6%
• Futures on the Dow Jones Industrial Average advanced 0.8%
• The FTSE 100 increased 0.4%
• The STOXX 600 rose 1%
• The MSCI World index was little changed

Currencies/h3

• The Dollar Index rose 0.1%
• The British pound fell 0.2% to $1.3642
• The euro fell 0.2% to $1.1777
• The Japanese yen fell 0.2% to 109.63 per dollar

Bonds/h3

• The yield on 10-year Treasuries advanced two basis points to 1.21%
• Britain’s 10-year yield was little changed at 0.55%
• Germany’s 10-year yield declined one basis point to -0.40%

Commodities/h3

• West Texas Intermediate crude rose 1% to $67.11 a barrel
• Gold futures rose 0.4% to $1,816.60 an ounce