Opening Bell: Futures, Global Stocks Rebound As COVID Worries Ease; USD, Oil Rise

 | Dec 07, 2021 08:36AM ET

  • While the focus is on rising tech stocks, small caps also recovered
  • Oil rally continues
  • Bitcoin moves higher

    • Key Events/h2

    US contracts on the Dow Jones, S&P 500, NASDAQ and Russell 2000 as well as global stocks advanced in trading on Tuesday as investors continue to take advantage of the Omicron dip. Traders now think the dramatic selloff in reaction to the discovery of the new strain of COVID-19 last week was overdone. The news from China, that it will ease requirements for bank reserves, has also buoyed investor sentiment. 

    The dollar advanced while gold was flat. 

    Global Financial Affairs/h2

    All four US futures were well into positive territory, with the Russell 2000 and NASDAQ 100 neck and neck for the lead. It is always interesting when these two futures contracts lead in tandem as they represent opposite sides of the reflation trade. The NASDAQ 100 includes 102 non-financial stocks, most of which are technology-centered companies which traders expect to outperform when the economy is under pressure. Conversely, the stocks listed on the Russell 2000 index tend to be small-cap, domestically focused companies which are more sensitive to any social restrictions introduced due to COVID-19.

    Another notable mention is that the Dow Jones contracts are the worst-performing. While firms listed on the oldest of Wall Street's averages include some large cap, multinationals, the benchmark overall represents value stocks. 

    Companies listed on the Russell and the Dow are on opposite ends of the size spectrum but they have performed in a similar way on coronavirus news. However that link seems to be broken as investors consider the recent plunge in the Russell 2000 which rendered the benchmark oversold thereby offering more relative value than the Dow Jones.

    In Europe on Tuesday, shares opened higher following Wall Street's higher close on Monday. The STOXX 600 Index ascended along with the technology sector.

    Earlier in Asia—the bridge between American and European trading—markets rebounded from yearly lows, boosted by the news that The People's Bank of China reduced bank reserve requirements, thus increasing liquidity to lubricate the flagging economy amid a property market slump. 

    Still, the world's second-largest economy expanded more rapidly than expected in November on record export demand.

    In the US, stocks bounced back yesterday from last Friday's selloff on reports that Omicron's symptoms are milder than feared.

    The S&P 500 advanced 1.2% on Monday, wiping out last week's decline while the NASDAQ 100 added 0.9% of value as investors turned risk-on after positive reports from South Africa on the new variant which calmed concerns that hospitals would be overrun.

    Treasury yields on the 10-year note rebounded for the third straight day but remain stuck below 1.5%. We think the current spike is likely to be short-lived based on the technicals.