Futures in the United States and Europe are up today after the Dow managed to gain nearly 260 points and break its five-day losing streak. Although investors are cautious ahead of the release of consumer price data, the market appeared oversold, prompting the indices to reverse their losses.
In yesterday’s session, the Dow Jones Industrial Average jumped 0.76%, and the S & P 500 index rose 0.23%. The Nasdaq, the tech-savvy index, declined 0.07%, and the Russell 2000, the small-cap index, soared 0.59%.
Stock Market
Stocks that are positively correlated with economic recovery gained ground yesterday as the seven-day average of Covid cases in the United States fell to 144,300 from nearly 167,600 at the start of September. As a result, the stock prices of companies such as cruise lines and airlines elevated.
Investors should also note that the Biden administration has suggested enhancing tax rates to cater to its $3.5 trillion spending plan. As per reports, the tax rates proposed come out to be 26.5% for big corporates and 39.6% for individuals. The rise in tax rates would mean fewer disposable earnings for companies in the coming months, and hence would adversely affect their stock market performances.
Moving forward, the stock markets are expected to remain volatile and to experience a period of correction. Markets are likely to experience a pullback because investors were bullish in previous months, contributing to improved optimism about economic recovery, and now is the time to match those expectations with reality and adjust accordingly. Having said that, while a reversal is likely, the risks of a recession are very likely to remain low. As a result, investors should view stock market dips as opportunities to purchase stocks at bargain prices.
Economic Reports
Stock traders should remember that the consumer price data is scheduled to be released today. Inflation is an important reading for investors as it is a significant factor in the Fed’s monetary policy. Higher inflation may force the Federal Reserve to act more aggressively related to its bond purchase tapering timeline. Inflation is expected to have jumped 5.4% year over year and is expected to be 0.4% month over month. Today’s inflation reading is likely to set the tone in stock markets ahead of the Federal Reserve’s meeting to be held next week.
Investors should also note that the National Federation of Independent Business will release its survey today, and this will give a glimpse into how small businesses are currently performing.
Cryptocurrencies
Crypto traders were in a frenzy on Monday after reports that Walmart accepted Litecoin as a medium for online payment for its products. The price of the digital coin rose by about 30% as a result of the fake news. The rally quickly died down after Walmart issued an official statement clarifying the situation and calling the GlobeNewswire report deceptive.
On the other hand, the software company MicroStrategy has purchased more bitcoins, worth nearly $243 million. The company owns a total of 114,042 bitcoins at an average price of $27,713. Traders view investing in this company as a way to gain exposure to the digital asset without actually holding the digital coins. As time goes on, seeing cryptocurrencies included in company portfolios is gaining normalcy. The digital asset is seen as a hedge against inflation and an alternative to holding gold.
Oil
Oil prices are rising as supply-side constraints tighten. Oil producers have yet to recover from Hurricane Ida’s devastation, and they are now bracing for another tropical storm, Nicholas, which is expected to be as powerful as Hurricane Ida. Almost 44% of the area’s oil supply has been cut off.
On the demand side, OPEC forecasts stronger demand in the remaining months of 2021 and 2022 in its monthly report. According to the report, countries will likely face supply shortages in the short term even if the cartel moves to utilise idle production capacity. Similarly, Bank of America predicts that oil prices will be around $100 at the start of 2021 due to a colder winter season.
Gold
Following the appreciation of the dollar index in relation to specific other currencies, gold prices have been on a downward trend. It reached its highest level in two weeks yesterday, owing to expectations that the US will begin withdrawing its massive stimulus package before the end of 2021, despite rising coronavirus cases. This has resulted in the strengthening of the US dollar and a drop in gold prices.