Kristian Rouz – Investors are selling US stock futures prior to Tuesday’s opening with Wall Street in the red as the market is overbought. The US dollar rallied, propelled by the anticipation of a coming interest rate hike in the US and a subsequent appreciation of American assets.
Stocks futures on all three major US indices have retreated overnight, as even the cheapest shares are now expensive. Besides, investors are jumpy ahead of the publication of another bunch of macro data due Tuesday.
Energy stocks listed on the S&P 500 Index have jumped some 27% since the limited rebound in crude prices started early this spring. At this point, the least expensive US stocks may be found in the banking sector as commercial lending is seen as underperforming; nonetheless, a steady influx of investment money may soon bring some upward correction in the pricing on cheapest stocks.
Futures bets on the Dow were 0.1% down at the close, the S&P 500 slid 0.2%, while Nasdaq futures were 0.16% lower. The retreat is rather a correction before another rally in the US stocks. Investors have no choice but to put their money into expensive shares as demand for stock far outweighs supply. Now is high time for enterprises rooted in the real economy to issue equities – those will be swept away at any price just below or even at the market level.
"Investors are being dragged kicking and screaming into the stock market because, while valuations are not cheap, there really aren’t any better options," Tom Mangan of the Xenia, OH-based James Investment Research said.
Still, it is 18% below the record highest set in 1999, meaning there’s still space to buy. Given the ongoing influx of money in the US, Wall Street is bound to grow further, the question is how robust will the expansion in real economy be. In case stock markets outpace the real economy way too far, a financial bubble may burst in a ‘dotcom crash’-similar fashion.
The most important global currency, the greenback, is now benefitting from the US Fed chair Janet Yellen’s remarks regarding the imminent future hike in interest rate, and also from last Friday’s strong inflation data, supporting Yellen’s tightening aspirations.
The dollar index was 1.1% up at 97.084 and expanding as investors expect to make a good money on a sell-off straight after the actual US rate hike. Before then, US assets will be subject to feverish demand.
Commodities were hit by a stronger dollar, with gold price declining and Brent crude having slid to $65.02/bbl.
