Stocks Gain Ground Despite Strong Sell-Off In The Oil Market

Traders Shrug Off Virus Worries

S&P 500 futures are gaining ground in premarket trading as investors shrug off worries about the spread of coronavirus in U.S. and China. Yesterday, the market opened higher but lost momentum despite strong Manufacturing PMI report which indicated that Manufacturing PMI increased from 62.1 in June to 63.4 in July compared to analyst consensus of 63.1.

Today, stocks look ready to move higher as traders bet that the new wave of coronavirus will have little if any impact on the economic activity. At the same time, it should be noted that the market is very close to all-time high levels, so traders may be sensitive to any bad news.

On Tuesday, traders will have a chance to take a look at the Factory Orders report for June. Analysts expect that Factory Orders increased by 1% month-over-month after growing by 1.7% in May.

Oil Tests The Key $70 Level

WTI oil managed to settle below the 50 EMA at $70.65 and is trying to settle below the psychologically important support level at $70. If this attempt is successful, it will gain additional downside momentum which will be bearish for oil-related stocks.

It looks that oil traders are worried about the spread of the Delta variant of coronavirus in China. China has already introduced additional virus containment measures. In Wuhan, all 12 million residents will be tested as authorities fear that Delta variant may spread fast.

The market fears that China may use hard lockdowns if the virus continues to spread, which may put significant pressure on the country’s demand for oil.

Treasury Yields Stay Close To Multi-Month Lows As Bond Traders Buy U.S. Government Bonds

The yield of 10-year Treasuries is currently trying to settle below 1.18% as traders continue to purchase U.S. government bonds despite inflation risks.

The rally in the U.S. government bond market serves as an additional positive catalyst for the stock market, which enjoys support from lower yields.

Interestingly, lower yields failed to provide material support to gold and silver which failed to develop upside momentum in recent trading sessions.

For a look at all of today’s economic events, check out our economic calendar.