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Vladimir Zernov
U.S. Stock Market

Traders Remain Bullish

S&P 500 futures are gaining ground in premarket trading as traders managed to shrug off virus fears and focused on the upcoming earnings season.

Analysts have generally set the bar low for companies during the pandemic so most firms easily beat earnings estimates.  At this point, it looks like traders are positioning for an upbeat earnings season which will bring many encouraging reports.

The recent job market reports have indicated that the second wave of the virus has started to put pressure on the economy. However, the negative developments occured in December, and it is not clear whether they had material impact on businesses’ performance in the fourth quarter.

The market stays very bullish, and traders are eager to purchase stocks on any potential upside catalyst while ignoring negative developments. In this light, S&P 500 has good chances to test new highs in the upcoming trading sessions.

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WTI Oil Tries To Settle Above The $53 Level

Oil traders quickly forgot about the latest developments on the coronavirus front and continued to bet on the positive impact of Saudi Arabia’s production cut.

The upcoming API Crude Oil Stock Change report is projected to show that crude inventories declined by 2.7 million barrels which may serve as an additional upside catalyst.

If inventories continue to decrease, oil may move closer to the $55 level. Meanwhile, oil-related stocks look ready for another strong trading session as investors’ money returns to the segment.

The U.S. Dollar At The Crossroads

The U.S. Dollar Index, which measures the strength of U.S. dollar against a broad basket of currencies, has managed to rebound from the recent lows at 89.21 towards 90.50.

This rebound was driven by rising U.S. Treasury yields and short-covering from traders who rushed to take their profits from bearish bets on the dollar.

However, this rapid rebound has stalled near 90.50, and the American currency will likely need additional catalysts to continue its upside move. The direction of the U.S. dollar will have a material impact on commodities, including oil and precious metals, as well as stocks.

If yields continue to increase and the U.S. dollar moves higher against a broad basket of currencies, riskier assets like stocks and commodities may find themselves under pressure as traders will increase purchases of U.S. government debt to benefit from rising yields and stronger dollar.

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

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