6:30am: Fleeting relief?
US stocks were expected to open slightly higher on Wednesday following sharp recent falls as investors ponder the prospect for more interest rate hikes, elevated levels of inflation, and a stronger dollar.
Futures for the Dow Jones Industrial Average were trading flat pre-market, while those for the broader S&P 500 index were up 0.1%, and futures for the tech-laden Nasdaq-100 were 0.2% higher.
The three major US indices fell on Tuesday, US bond yields spiked and the dollar extended its rally, as Americans returned from their Labor Day break, noted Ipek Ozkardeskaya senior analyst at Swissquote Bank.
“The S&P500 closed a couple of points above the closely watched 3900 mark, the major Fibonacci 61.8% retracement on the summer rally, which, if cleared should point at a deeper bearish trend in the medium run,” she added.
The US Federal Reserve's recent series of interest rate increases and its determination to fight inflation with more rate hikes have kept investors on edge as they fear that economic activity in the world’s biggest economy will start to waver. While economic data, especially in the labor market, continue to hold up well, many expect headline figures to soften over the coming months.
These factors are putting equities under pressure although each bout of selling is likely to be tempered by a spot of bargain hunting in US markets, especially as investors look to avoid turbulence in global markets.
Ozkardeskaya pointed out that the equity sell-off has deepened as US companies rush to sell bonds before it gets more expensive.
She noted: “Yesterday alone, 19 US companies including big names like Nestle, Walmart, Target and McDonalds issued a large amount of bonds – about $30 to $40 billion - following an almost 60bp point jump in high-grade yields since the beginning of August. That’s the largest amount sold since September last year.”
The demand for bonds pushed the US 2-year Treasuries yield above 3.50%, and the 10-year yield above 3.35% for the first time since mind-June, she added.
Contact the author at jon.hopkins@proactiveinvestors.com
US stocks seen opening cautiously higher as investors ponder outlook for economy - Proactive Investors USA
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