S&P 500 futures are losing ground in premarket trading as traders remain worried about the spread of the Delta variant of coronavirus and the potential reduction of Fed’s asset purchase program.
The same catalysts were in play on Thursday, when the market opened lower. However, “buy the dip” mentality prevailed, and S&P 500 finished the day in the positive territory.
Today, Treasury yields are moving lower as bond traders increase purchases of safe-haven U.S. government bonds. The safe-haven U.S. dollar also enjoys strong support. The U.S. Dollar Index, which measures the strength of the U.S. dollar against a broad basket of currencies, has recently managed to get above yearly highs that were reached back in March and continues to move higher.
Safe-haven assets are gaining ground while riskier stocks are under pressure in premarket trading, but it remains to be seen whether S&P 500 will be able to finish the day in the negative territory as traders look ready to buy any pullback.
WTI Oil Tests Support At The $62 Level
While stocks are trading near all-time high levels despite virus worries and tapering fears, WTI oil gained strong downside momentum and is trying to settle below the $62 level.
This is bearish for oil-related stocks which are set to open at multi-month lows. OPEC+ decision to increase production came at a time when the Delta variant of coronavirus hit Asian countries. Together, these catalysts put significant pressure on the oil market.
The current downside momentum is strong, and WTI oil is already close to the psychologically important $60 level. In case WTI oil manages to get to the test of this level, oil-related stocks will find themselves under more pressure.
Gold Trades Near $1800 Despite Stronger Dollar
Gold has recently made another attempt to settle below the support at $1775 but failed to develop sufficient downside momentum and moved back to the 20 EMA near $1785.
Interestingly, gold’s strength failed to provide any support to gold mining stocks which declined to March lows during yesterday’s trading session. If gold finally manages to get above the $1800 level, it will gain additional upside momentum and head towards the $1830 level. In this scenario, gold mining stocks may be set for a strong rebound.