U.S. Opening Bell: Futures Mixed Despite Likely Record First Half; USD Rallies

 | Jun 29, 2021 12:28

  • Stocks on track for one of the best first halves on record
  • Delta variant concerns increasing globally
  • Oil falls despite tightening demand

    • Key Events/h2

    US futures on the Dow, S&P, NASDAQ and Russell 2000 were wavering in pre-US market trading on Tuesday after the S&P 500 and NASDAQ hit new record highs during Monday's Wall Street session, driven by the technology sector. Contracts on the Dow, whose underlying index lists a variety of mega cap value stocks neglected during the lockdown were this morning's strongest performers.

    European stocks rebounded with value shares. Markets in Asia suffered losses on continued concerns over the Delta variant, which is threatening to further damage the global economic recovery. The dollar recovery persisted.

    Global Financial Affairs/h2

    We're seeing both sides of the reflation trade today, in various parts of the world. European markets are rising with value sectors. The STOXX 600 Index opened 0.4% higher, boosted by industrial, financial and mining companies—sectors expected to gain with an economic recovery. The pan-European gauge, however, was dragged down slightly by cruise operators and airlines on fears that the highly contagious Delta strain of COVID-19 will spur the return of lockdowns.

    Asia was painted red, with all major indices closing lower. Hong Kong’s Hang Seng fell 1.1%, underperforming, followed by the Shanghai Composite, which gave away 0.9% of value. Traders are concerned by the rapidly spreading Delta variant; the situation could change quickly, as we saw last year.

    The divide between value and growth stocks has been shifting at an ever-increasing pace. On June 20, we outlined how growth stocks—which outperform during economic contraction—were dominant this year, in multiple time frames. Then, on Sunday we showed how that trend was shifting, back to value stocks, which do better during economic recoveries. Finally, yesterday, it was tech stocks that led the market to new heights, adding $6 trillion in value to the stock market. Perhaps, the balance between value and growth is becoming difficult to maintain.

    Two anti-monopoly lawsuits against Facebook (NASDAQ:FB) were dismissed yesterday, driving shares in the social media giant up over 4%. The decision also benefited other large players in the sector including Apple (NASDAQ:AAPL), Amazon (NASDAQ:AMZN) and Zoom Video (NASDAQ:ZM) which all closed higher.

    Cruise operators sank and airlines crashed after Asia and Europe reimposed limits on travel from the UK, which is suffering from a spike in cases of the Delta variant.

    With stocks on track for one of their best first halves in history, the debate over elevated valuations has returned to the fore of investors' minds. The S&P 500 is trading above the average of the past decade, and this quarter may potentially mark the peak of profit recovery from the depths of the pandemic. Meantime, demand for limited increase the WTI price is still faltering.