Dow Jones futures rise following 380pt decline on Monday

We examine the DJIA’s movements overnight, as well as where futures markets suggest the US benchmark will open on Tuesday, 5 January 2021.

US equity markets retreat, Dow futures trade higher

The Dow Jones Industrial Average (DJIA) started out the New Year lower, finishing out Monday's session down 382 points or 1.25%, at the 30,223 point level.

On a more granular level, Walgreens Boots Alliance, Walmart and Goldman Sachs were the best performing equities; while Merck, Amgen and IBM were the worst performing.

In relative terms, the DJIA did however prove to be the best performing key benchmark overnight – with the broad based S&P 500 pulling back 1.48% while the Nasdaq declined 1.50%.

Commenting on these market movements, IG Market Analyst Kyle Rodda, speculated:

‘There’s probably a highly technical element to last night’s pullback in US equities: the argument has long been that after an extraordinary end to 2020, fuelled as much by hope and momentum than by improvements in the macroeconomic outlook, stocks might be due for a drop as portfolio managers bank profits and reposition for the new year.’

‘Even still, the drop in US stocks possessed conviction. Although the S&P500 finished well off its intraday lows, breadth was paltry at 15 per cent, while volumes were remarkably high for the first trading session of January,’ Mr Rodda added.

Despite that weakness overnight, futures markets suggested that US equity markets would open slightly higher on Tuesday – with Dow Jones futures trading 50 points higher, at the time of writing.

A volatile backdrop

All of this comes as coronavirus cases continue to increase – both in the US and on a global scale. Overnight, the world recorded 521 thousand new cases of the virus, with the US continuing to lead the way in terms of case counts, adding 181 thousand new cases overnight.

How has all of this impacted other asset classes? Gold, as Mr Rodda notes, rose strongly overnight as the Greenback (USD) retreated. On this front, Mr Rodda in a note to clients added:

‘US 10 Year Breakevens climbed above 2 per cent for the first time since late-2018 last night, pushing real yields towards record lows. The dynamic catalysed a break-out in the price of gold of its downward trend channel, as the yellow metal now eyes resistance around $US1965.’

On the other end of the asset spectrum – Bitcoin (BTC), which as again risen to prominence in the last week – traded with extreme levels of volatility overnight: Hitting a 24-hour low-high range of US$28,722.76- 33,440.22.

As investors flee more traditional markets, Bitcoin – maybe the world’s most well-known alternative asset has again soared in value and popularity – rising ~21% in the last 7 days.

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