US stocks are set to rise for third day in a row after Reddit bets tumble, while oil hit a one-year high as economic outlook brightens
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- US futures rose on Wednesday, pointing to another good day for stock markets.
- Oil prices rose to a one-year high after data showed supplies fell last week.
- Analysts said the fall in GameStop and other ‘meme’ stocks had calmed nerves.
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US stocks were set to rise for the third consecutive day on Wednesday, according to futures prices, as markets looked past the recent retail-trading disruption towards an economic recovery in the middle of the year.
S&P 500 futures rose 0.3%, although Dow Jones futures were only 0.04% higher. Nasdaq futures climbed 0.65%, boosted by strong earnings from big technology companies.
Oil prices rose to one-year highs as the outlook brightened, with an unexpected drawdown from US oil stocks helping the market.
The dollar traded at around two-month highs. Asian stocks moved broadly higher overnight, while European equities opened in the green.
Read More: Vanda Research’s new retail-investor tracker nailed silver and AMC as likely targets for a Reddit-driven short-squeeze. These are the 4 stocks it says could be the next GameStop.
Investors have made a strong start to February after a bruising final week of January, when an army of retail investors, organizing themselves on Reddit, piled into previously unloved stocks such as GameStop.
The day-trading mania caused hedge funds who had been betting against GameStop and others to withdraw from their stock positions at the fastest rate since 2009, according to Goldman Sachs, rocking wider market confidence.
Yet GameStop shed 60% to hit $90.00 on Monday. Cinema chain AMC, BlackBerry and others also tumbled as the retail rally faded.
“The Reddit-mania appeared to be running its course overnight,” said Jeffrey Halley, senior market analyst at currency firm Oanda.
“That has allowed markets to get back to business as usual, which means of course, following the Biden stimulus package’s progress through the US Senate.”
President Joe Biden is pushing for a $1.9 trillion stimulus package that Republicans want scaled back. However, Democrats are pushing ahead with a process that could see the package pass without Republican support.
The prospect of another big stimulus injection has boosted oil markets. Prices rise when investors think economic activity – and therefore the use of oil – will be higher in the future.
A bigger-than-expected fall in US crude oil inventories last week, reported yesterday by the American Petroleum Institute, has also pushed up prices. That is because it points to strong consumption of oil.
The US benchmark WTI crude price rose 0.35% on Wednesday morning to $58.95 per barrel. Brent crude was roughly flat at $57.80 a barrel.
In Asia overnight, Japan’s Nikkei 225 stock index rose 1% while South Korea’s KOSPI climbed 1.06%. China’s CSI 300 slipped 0.29%.
Read More: JPMorgan’s market-moving quant guru lays out an under-the-radar risk that could spring up during the pandemic recovery and snowball into a full-blown crisis across the western world
Europe’s Stoxx 600 index moved 0.38% higher in early trading, although the UK’s FTSE 100 slipped 0.03% after opening in the green.
Strong earnings from Amazon and Google helped sentiment in the US, despite the announcement that Jeff Bezos will step down as chief executive of the online retail giant.
The dollar index slipped very slightly to 91.19, having hit a two-month high of more than 91.2 on Tuesday. Investors still broadly expect the dollar to fall in 2021 as investors move their money into riskier assets and low interest rates yet make themselves felt.
US bond yields inched higher as prices slipped. The yield on the 10-year US Treasury note climbed 0.3 basis points to 1.110%.
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