U.S. Stocks Set To Open Higher As Investors Hope For Quick Recovery

U.S. Equities Are Gaining Ground Again

S&P 500 futures are gaining more than 1% in premarket trading as investors continue to express optimism about the reopening of the world economies.

The U.S. Federal Reserve is starting its two-day meeting, while the Fed Interest Rate Decision is expected at Wednesday. Currently, the rate is 0.25%, and no change is expected. In this light, investors and traders will focus on Fed’s commentary about the current unprecedented market environment.

The earnings calendar is very busy, and many big companies are set to report their results today. So far, the market managed to ignore disappointing results or guidance as it believes that a recovery from the coronavirus crisis will be robust.

Oil Continues Its Downside Move

WTI oil is going down once again, and the June 2020 contract is trading below $12.00. The reason for the downside stays the same – traders are worried about oil storage capacity.

In addition, the United States Oil Fund ETF decided to rebalance its positions to longer-dated contracts, putting additional pressure on the June 2020 contract.

I’d note that many oil stocks have held fairly well during the recent turmoil in the oil market. It remains to be seen whether this trend will continue since majors start reporting their results this week.

Today, BP reported its first-quarter results, missing analysts estimates but maintaining its dividend. Dividend stability of major oil companies is the main question during this earnings season, and BP’s decision to keep the dividend will likely set the tone for trading in other big oil stocks.

How Long Will The Market Recovery Last?

S&P 500 continues to rebound from lows seen in mid-March despite the grim economic data as governments and central banks inject an increasing amount of liquidity into the financial system.

So far, the market has proved that it is ready to face bad news, and so far the earnings season was not an obstacle for market upside despite first signs of significant challenges in many companies.

At this point, the situation is similar to the one we have seen at the end of 2018 – beginning of 2019, when the stock market quickly tumbled but then made an immediate rebound.

However, the economic situation is much more challenging right now, and the world is facing a major recession. The higher the equity market goes, the higher the risk of a sell-off.