U.S. Opening Bell: Futures, Stocks Up On Vaccines, U.S. Bill Revival; Dollar Down

If the index climbs a little higher, to above the 4,575 level, it will have completed a hammer—a bullish candle, the making of which is seen in all the major US benchmark futures. The hammer's location—a price level with vested interest—adds to its bullishness.

While all four US index contracts were in the green, the NASDAQ 100 regained its leadership position. The tech-heavy contract significantly outperformed the Russell 2000, which was the laggard of the group. This paradigm may suggest that investors are not placing bets on a continuous and sustainable economic recovery which would favor the economically sensitive stocks listed on the Russell.

However, a different picture is developing on the continent, where the STOXX 600 rallied on the back of a rebound in the mining sector, which tracked commodities higher. Perhaps the shorter decline in European markets—only two days compared to the three day slide by the S&P—altered the mix of profit-taking between the continents.

Stocks in Asia rebounded in proportion to the heavy selloff on Monday. Japan's Nikkei 225, which was the underperformer in the region yesterday, posted the strongest gain, rallying 2.1%.

All four US indexes closed deeply in the red yesterday with the Russell again leading the slide, down 1.55%.

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The S&P outperformed, dropping just 1.14%, thanks to defensive and technology stocks, an unusual pairing, though we have previously reported a similar trend. The tech sector slipped just 1.38%, much less than the losses suffered by economically sensitive sectors.

Cyclically sensitive stocks suffered the most significant losses, with the energy sector shedding 2.5% of its value, closely followed by financials which lost 2.41%, materials, which declined 2.28%, and consumer discretionary's 1.75% slide. Conversely, the utilities sector dug its heels in, retreating only 0.69%, followed by communications services which fell 0.9%.

Yields on the 10-year Treasury note have failed to provide any additional clarity as bond traders are taking a watch and wait approach. We have commented before on the disconnect between the bond and equity markets. All things being equal, when stocks rise there is an expectation that so will Treasury yields, as traders sell out of secure bonds and invest in the potential profit growth in equities.

So bond traders' wait-and-see approach makes sense as we are dealing with two unknowns—Omicron and the likely success of Biden's $2-trillion spending bill.

While yields, including for the 10-year Treasury note, are flat, the dollar is falling for the second day.