Opening Bell: Markets Waver Ahead Of U.S. CPI, Earnings; Gold Advances

Key Events

After last week's volatile market activity, all four US futures contracts were trading in the red early Monday, though at time of publication some were fluctuating. Contracts on the Dow Jones, S&P 500, NASDAQ and Russell 2000 were lower to start the trading week with European markets slightly higher as investors continue to monitor the ongoing corporate earnings season for any indication on future performance, while awaiting US inflation data due to be released on Thursday and consumer sentiment figures on Friday.

Gold rallied as investors sought refuge via safe havens.

Global Financial Affairs

Friday's astonishingly positive US employment data threatened to end the concerted effort from US Federal Reserve members to soothe nervous investors. After the Fed Chair, Jerome Powell, indicated a much more hawkish stance at the last press conference markets were concerned that a 0.5% interest rate hike is likely at the next FOMC meeting.

Last week's Treasury yield surge pointed to higher US rates, suggesting investors were not buying the backpedaling by Fed members who were urging a gradual shift in policy rather than aggressive tightening. They pointed to ongoing risks to the global economy, including the coronavirus pandemic and the 100,000 Russian troops near the border with Ukraine. 

The ECB and the BOE have joined the Fed in its tightening policy stance. Last week's announcement by the Bank of England raising rates by 0.25% for the second time means it is currently the most aggressive central bank and the ECB is at the rear of the queue.

Though US futures contracts continue to waver this morning, futures on the Russell 2000 were consistently leading the slump, down as much as 0.8% at one point. 

The STOXX 600 Index was slightly higher with retail and basic-resources equities while energy and real-estate-related stocks are declining.

Earlier this morning, most Asian indices ended lower with the Nikkei 225 down 0.7% and Korea's KOSPI 50 down 1.1%. However, China's Shanghai Composite rallied more than 2% as local traders attempted to catch up after last week's Lunar New Year holiday there.

While yields on the 10-year Treasury note eased, they remained above 1.9%—the level a Treasury selloff pushed yields to for the first time since 2019.

10-year Treasuries Daily

Yields broke the topside of a symmetrical triangle, an upside breakout of a much larger symmetrical triangle—which signals higher rates ahead. Rising market rates lead to higher Fed rates which is typically bearish for stocks.

The dollar slipped slightly after reaching the bottom of its rising channel (green) since May's bottom.

Dollar Index Daily

Bulls must now prove that they can break free of the shorter-term falling channel (red).

Gold climbed for the second day on its haven status, demonstrating that investors are nervous and willing to offset the higher price due to a stronger dollar.

Gold Daily

Nevertheless, we expect the precious metal's rise to be temporary, as a set up for bears to complete a rising flag, bearish after the initial sharp plunge.

Bitcoin was slightly higher as it flirts with breaking free of a second consecutive rising flag, bearish after the last drop in the aftermath of an H&S top.

Bitcoin Daily

If trading in the cryptocurrency follows through on the principles of technical analysis, it will complete a gigantic double top, whose implied downside breakout targets multi-year lows.

Oil retreated from the highest levels since September 2014, after seven weekly gains. The recent price increases from Saudi Arabia could pay off for oil bulls. 

Oil Daily

While the primary trend is rising, on the hourly chart, the peaks and troughs of the price established a downtrend.

Up Ahead

• Earnings season continues with Pfizer (NYSE:PFE) reporting on Tuesday. 
• US crude oil inventories are reported on Wednesday.
• On Thursday initial jobless claims are published. 

Market Moves

Stocks

• The STOXX 600 was little changed
• Futures on the S&P 500 fell 0.3%
• Futures on the NASDAQ 100 fell 0.2%
• Futures on the Dow Jones Industrial Average fell 0.3%
• The MSCI Asia Pacific Index fell 0.1%
• The MSCI Emerging Markets Index fell 0.2%

Currencies

• The Dollar Index was little changed
• The euro was little changed at $1.1441
• The Japanese yen fell 0.2% to 114.96 per dollar
• The offshore yuan was up 0.1% to 6.3642 per dollar
• The British pound fell 0.1% to $1.3513

Bonds

• The yield on 10-year Treasuries was little changed at 1.91%
• Germany's 10-year yield advanced two basis points to 0.22%
• Britain's 10-year yield was little changed at 1.42%

Commodities

• WTI crude dropped 1.5% to $91.35 a barrel
• Brent crude fell 1.1% to $92.27 a barrel
• Spot gold rose 0.2% to $1,812.57 an ounce