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U.S. Opening Bell: Inflation Worries Drive Treasury Selloff; Futures Down, Gold Up

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US Treasury yields soar on sharp bond selloff
Biden looks for Europe to stop buying Russian energy

Key Events

Concerns about spiking inflation drove bond prices towards record losses as investors sold off Treasuries in order to fuel a global rally in stocks. Still, US futures on the Dow Jones, S&P 500, NASDAQ and Russell 2000 turned lower on Wednesday.

Oil remains volatile and under pressure.

Global Financial Affairs

US contracts were trading slightly in the red with futures on the Russell 2000 underperforming, just a day after technology stocks led Wall Street in a rally, with the NASDAQ ending the day almost 2% higher.

On Tuesday traders seemed to think that the disruption of global commodity supplies and resultant higher prices for raw materials due to the war in Ukraine had already been priced into stocks.

However, further price hikes may be in the cards as US President Joseph Biden is due to join a NATO meeting and EU Summit in Europe on Thursday to push for more severe sanctions against Russia as well as an embargo of Russian gas by NATO allies.

On Wednesday, stocks in Europe advanced for the sixth consecutive day, their longest winning streak since November 2021. Sectors that suffered during the coronavirus restrictions, including automakers and travel & leisure, outperformed.

Key benchmarks on the continent have regained some of the losses incurred due to the invasion of Ukraine by Russia, as investors have been buying the dip in the belief that sanctions will only have a temporary impact on commodity supplies and prices.

The STOXX 600 Index remains lower for the year on worries that tightening monetary policy will reduce liquidity and therefore weigh on demand.

STOXX 600 Daily

The pan-European gauge climbed above the neckline of a down-sloping H&S top and just crossed the 50 DMA. There is still a danger that prices will decrease after the reversal pattern.

Earlier this morning, stocks in Asia rallied, taking their cue from Tuesday’s tech rally on Wall Street, though the ongoing conflict between Russia and the West has kept a lid on gains.

US equities jumped on Tuesday as record losses in bonds drove investors to rotate into stocks after US Federal Reserve Chair, Jerome Powell surprised markets with another policy flip to the hawkish side on Monday.

The S&P 500 rose 1.13%, crossing above the 200 DMA, a bullish signal. However, just two days earlier, the 50 DMA crossed below the 200 DMA, triggering a Death Cross, which is a bearish signal.

Tracking a decline in oil prices, the Energy sector dropped 0.74%, the only SPX sector to slide. The Consumer Discretionary sector jumped 2.48% while the more influential Technology sector was 1.44% higher and the tech-heavy NASDAQ surged 1.95%, crossing its 50 DMA. However, like the S&P 500, recently, the NASDAQ suffered a Death Cross.

Yields on the 10-year Treasury note advanced to their highest level since May 22, 2019. The severe bond selloff shows little sign of ending soon, as the Fed is expected to speed up its interest rate hikes.

10-year Treasuries Daily

Yields completed a weekly H&S bottom from July 2019 to January 2022. The 50 WMA is heading to the 200 WMA to trigger a Golden Cross after having already crossed the 100 WMA.

The dollar rallied for the fourth consecutive day.

Dollar Index Daily

After completing an H&S continuation pattern, the greenback was bullish, trading within a falling flag.

Gold rose as traders are concerned that the US Federal Reserve will move more aggressively to quell rising inflation. However, the price is expected to remain under pressure for the next few months.

Gold Daily

The yellow metal is trading with a small H&S top following a giant symmetrical triangle, lasting over a year, whose implied target was already reached.

Bitcoin fluctuated around Tuesday’s closing price. The rally yesterday wiped out two days of losses and meant that the digital coin was hovering at its highest level since Mar. 3.

Bitcoin Daily

The cryptocurrency was nearing the top of a symmetrical triangle, which is expected to be to the downside after completing the H&S top.

Oil fell amid considerable volatility as EU foreign ministers remain split on a ban on Russian oil imports.

Oil Daily

The price may continue to slide, having completed the Return Move to a small H&S top whose implied target will push prices below the Mar. 15 low, establishing a descending series of peaks and troughs.

Up Ahead

Eurozone Manufacturing PMI prints on Thursday
US Initial Jobless Claims, Durable Goods Orders reports are released Thursday
On Friday Germany Ifo Business Climate Index is published

Market Moves

Stocks

S&P 500 futures fell 0.2%
NASDAQ 100 futures were down 0.25%
STOXX 600 was little changed.

Currencies

The Japanese yen was at 121.02 per dollar, down 0.2%
The euro was at $1.1012, down 0.1%

Bonds

The yield on 10-year Treasuries rose two basis points to 2.40%
The yield on 10-year Australian bonds rose five basis points to 2.77%

Commodities

West Texas Intermediate crude dropped 1.17% to $110.76 a barrel
Gold was at $1,928.55 an ounce

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