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Stock Market Lower as Oil Slides on Delta Case Jump, Gold Tumbles on Rate Bets

Stocks look set to retreat from record highs Monday as oil prices tumble and rate hike bets begin to accelerate following Friday's stronger-than-expected jobs report.

The Monday Market Minute

  • Global stocks steady amid a sharp  pullback in oil and gold prices sparked by a stronger U.S. dollar and demand concerns linked to Delta variant infections.
  • Friday's stronger-than-expected payroll data has lifted the dollar to a four-month high against the euro as tapering bets accelerated.
  • Oil prices tumble on soft China imports, rising Delta infections and a firmer greenback. 
  • Benchmark 10-year note yields hold at 1.288% ahead of a busy week for new auctions and CPI data on Wedenesday,
  • Disney, ebay and Nordstrom highlight a quiet week for corporate earnings, with second quarter S&P 500 profits forecast to rise 93.1% from last year to $439.5 billion.  
  • U.S. equity futures suggest a softer open on Wall Street ahead of second quarter earnings from Tyson Foods and AMC Entertainment .

U.S. equity futures moved lower Monday, while an extended rally in the dollar pushed gold and oil prices deeply into the red, as investors adjusted both rate hike bets following Friday's jobs report and growth forecasts in the face of rising Delta variant infections in Asia. 

A stronger-than-expected July employment report, which showed a net 943,000 new jobs were created last month as average hourly wages rose 4% from last year to just over $30.50, has trigged bets on a near-term signal from the Federal Reserve on slowing the pace of its $120 billion in monthly bond purchases.

Analysts see that as the first in a series of steps that could culminate in rate hikes by the end of next year as the economy continues its strongest post-recession recovery in more than half a century. 

A busy week for bond market auctions -- including the sale of $41 billion in new 10-year notes on Wednesday that comes just hours after July inflation data -- will test the Fed's mettle on tapering and rates in a week that's otherwise bereft of blue chip corporate earnings. 

In the meantime, rate hike bets have lifted the U.S. dollar to a four-month high of 1.1742 against the euro, and that's helped push oil prices sharply lower, with WTI crude falling $3.08 in overnight trading to $65.24 per barrel. 

A weak run of Chinese import data, rising Delta-variant infections in Asia and a surprise bump in domestic crude stocks last week have added to the downside pressure.

On Wall Street, stocks are set for a modest pullback from last week's trio of record high closes, with futures contracts tied to the Dow Jones Industrial Average indicating a 110 point opening bell gain and those linked to the S&P 500 priced for a 7.5 point retreat. 

Pre-market gains for Advanced Micro Devices  (AMD) - Get Free Report and Tesla  (TSLA) - Get Free Report are providing support for the Nasdaq, with the tech-focused benchmark expected to open 10 points higher at the start of trading.

Walt Disney  (DIS) - Get Free Report, Nordstrom  (JWN) - Get Free Report, AMC Entertainment  (AMC) - Get Free Report, Tyson Foods TSN and ebay  (EBAY) - Get Free Report highlight a quiet week for S&P 500 earnings, while July CPI data is expected at 8:30 am on Wednesday.

Investors will also be tracking the progress of the Senate's $1 trillion infrastructure bill, which looks set for passage in the upper house early this week before moving on to a sterner challenge in the House of Representatives. 

In overseas markets, the overnight slump in oil prices, as well as a sharp decline in gold that pulled the bullion to $1,684 per ounce in early Frankfurt trading, has European stocks on the back foot Monday, with the Stoxx 600 marked 0.1% lower in the opening hours of trading.

Overnight in Asia, a national holiday in Japan kept markets closed and sapped regional liquidity, but a solid start to the week for China stocks lifted the region-wide MSCI ex-Japan index by 0.02% heading into the final hours of trading.