Opening Bell: U.S. Futures, Global Equities Rise Despite Oil Price Collapse

Key Events

Consternation over the price of oil continued to dominate markets on Wednesday, adding another layer of risk and disruption to an already unstable financial environment. Still, U.S. futures for the S&P 500, Dow Jones and NASDAQ, as well as European shares, were all higher this morning. Asian indices were mixed.

Yields rebounded and gold moved higher.

Global Financial Affairs

After WTI's May contract dived deep into subzero territory earlier in the week, prices for front month June crude oil futures are now also tumbling, nearing the $11 mark, a level not seen in decades, the lowest since December 1998.

Oil has broken to the bottom side of a long-term pattern, in place since it hit its all-time high of $147.27, reached during July 2008. Overall, the chart paints a dismal picture, and not just for the commodity. Considering oil demand, and thus pricing, is also in large part an extension of the global economy and its outlook, it doesn’t bode well for investors in any risk asset.

Earnings, another key economic indicator, are also fueling worries. This is the first season when reports will begin to reflect corporate damage related to COVID-19, which continues to spread, making upcoming results the most uncertain ever experienced.

So far reports have been mixed: restaurant chain Chipotle Mexican Grill (NYSE:CMG) yesterday withdrew its guidance. Streaming entertainment giant Netflix (NASDAQ:NFLX) announced during yesterday's earnings call it had doubled the number of new subscribers it expected in the first quarter. Roche Holding (SIX:ROG) said it still expects a small profit gain this year as demand for its best-selling medicines holds up and the drugmaker works on developing coronavirus tests.

This morning, S&P 500 futures climbed after the underlying benchmark fell Tuesday, dropping more than 3%. Investors seemed to shrug off the news a deal had been reached between the White House and the Senate on a fresh relief package to counter the deepening economic hit to small businesses from the coronavirus. It must now go to the House of Representatives for approval.

An advance by telecom and tech shares offset a selloff in energy producers, leading the Stoxx Europe 600 Index higher today.

Asian shares were mostly in positive territory on Wednesday, though Japan’s Nikkei 225, (-0.7%), and Singapore's Straits Times (0.07%) were lower; Australia’s ASX 200 ended flat, with a 0.00% change. South Korea’s KOSPI (+0.9%) outperformed.

On Wall Street yesterday, U.S. stocks dropped the most in three weeks as the oil crisis reawakened fears of financial collapse, triggering another bout of demand for Treasurys.

The S&P 500 Index plunged 3.07 percent.

The benchmark’s selloff pushed prices below the uptrend since the March 23 bottom, after the index found resistance on Friday by the Feb. 28-trough and the 50 DMA, after the 50 and 200 DMAs triggered a Death Cross.

Treasury yields, including for the 10-year benchmark, rebounded after falling to their lowest level since the March 9 all-time low. Technically, yields completed a bearish triangle, suggesting they are headed lower still.

The U.S. dollar retreated after yesterday's climb.

The global reserve currency's decline made it easier for gold to bounce off the neckline of a H&S bottom, sending the precious metal higher.

Up Ahead

• Crude Oil Inventories will be released later today. It's expected they'll have plunged to 11.676M from 19.24M.
• Thurday's Initial Jobless Claims print in the U.S. will be in focus, after 22 million American workers—10% of the workforce and counting—have lost their jobs in the past few weeks.
• The U.S.'s Core Durable Goods Orders report on Friday will likely show the metric has tumbled to -6.0% from -0.6%.

Market Moves

Stocks

• The Stoxx Europe 600 Index increased 0.8%.
• Futures on the S&P 500 Index climbed 0.7%.
• NASDAQ 100 futures gained 0.8%.
• The MSCI Asia Pacific Index rose 0.2%.

Currencies

• The Dollar Index decreased 0.1%.
• The euro climbed 0.1% to $1.0865.
• The British pound increased 0.2% to $1.2315.
• The Japanese yen strengthened 0.2% to 107.56 per dollar.

Bonds

• The yield on 2-year Treasuries declined one basis point to 0.20%.
• The yield on 10-year Treasuries fell one basis point to 0.56%.
• The sovereign bond Italy 10-year vs Germany 10-year Spread declined two basis points to 2.608 percentage points.
• Japan’s 10-year yield declined two basis points to 0.002%.

Commodities

• West Texas Intermediate crude declined 5.7% to $10.91 a barrel.
• Brent crude declined 12.2% to $16.98 a barrel.
• Gold strengthened 0.2% to $1,689.13 an ounce.
• Copper fell 0.1% to $2.26 a pound.