S&P 500 futures are swinging between gains and losses in premarket trading as traders evaluate their next moves after yesterday’s sell-off.
On Thursday, Treasury yields surged to new highs and put significant pressure on tech stocks. S&P 500 finished the session down by 1.5%, while the tech-heavy Nasdaq lost 3%.
Today, the situation in the bond market calmed down, and Treasury yields pulled back from recent highs. This pullback was signifiant as the yield of 10-year Treasuries declined from 1.75% to 1.68% while the yield of 30-year Treasuries moved from 2.51% to 2.42%.
This pullback provides some support to tech stocks, and shares of yesterday’s losers like Tesla or Apple are gaining ground in premarket trading. It should be noted that it is not clear whether the pullback in Treasury yields will be sustainable as bond traders will likely remain worried about higher inflation in the near term.
Oil Tries To Rebound After Major Sell-Off
Yesterday, WTI oil moved from the $64 level to the test of the 50 EMA at $58.65 on fears about new virus-related restrictions in Europe. France was forced to impose a lockdown on Paris as more contagious variants of COVID-19 caused the third wave of the virus. The situation is also challenging in Poland, Italy and Germany.
Another wave of lockdowns may hurt the recovery of oil demand and put pressure on oil prices which were boosted by Saudi Arabia’s decision to cut its production by an additional 1 million barrels per day.
Currently, WTI oil is trying to settle back above the psychologically important $60 level. If this attempt is not successful, oil-related equities will find themselves under pressure.
U.S. Dollar Attempts To Get Above The Major Resistance Level
The U.S. Dollar Index, which measures the strength of the U.S. dollar against a broad basket of currencies, is currently trying to settle above the resistance at the 92 level. This resistance level has already been tested many times in recent trading sessions and served as a major obstacle on the way up for the American currency.
If the U.S. dollar manages to settle above the 92 level, it may gain significant upside momentum. In this scenario, precious metals like gold and silver will likely move lower. Stronger dollar will be also bearish for other dollar-denominated commodities. In addition, stronger dollar may put some pressure on stocks although traders will likely stay more focused on the dynamics of Treasury yields.