E-mini S&P 500 Futures (March): Settled at 3692.25, down 56.50
E-mini Nasdaq-100 Futures (March): Settled at 12,685.50, down 200.00
Risk assets reversed sharply upon the first opening bell of the year yesterday. From U.S. equity benchmarks to Platinum and Soybeans, many asset classes began surging higher at the Sunday night open before volatility ensued at 8:30 a.m. CT. What changed? Well, the U.S. Dollar of course; the Dollar Index pared losses of 0.5% to trade in positive territory for a period. The news cycle certainly shifted sentiment and here, yesterday, we pointed to a few headlines overshadowing what had begun as a terrific start to the year for risk-assets. The 2 most imminent are the Georgia Senate runoffs and mounting Covid-19 cases forcing lockdowns.
Today is election day, but it’s unlikely that we see results of the contentious runoffs for a couple of days. Democrats must win both of the 2 Senate seats up for grabs in order to complete a blue sweep, taking control of all 3 branches of government. There is no doubt in our minds that such a sweep has weighed on risk-sentiment. Yes, on one side of the coin, a sweep paves the way for added fiscal measures. However, on the other side, it underpins fears of a drastic shift in tax policy and a barrage of corporate headwinds, especially for Big Tech. Ultimately, it adds uncertainties, and as the odds of such increased slightly, it weighed on risk-assets broadly.
Surging Covid-19 cases in the UK forced the government to announce a new 6-week lockdown. In Germany, the government extended its current restrictions for another 3 weeks. In the U.S., headlines are focused on hospitalizations and deaths in California lingering from Thanksgiving as fears mount in anticipation of even more tied to Christmas. The narrative instills a broad fear that state and local governments across the country could increase restrictions, forcing a deflationary event. Adding to worries is the pace of inoculation which has been far slower than initially forecasted.
That said, not all news was negative: final December U.S. Manufacturing PMI improved, unlike data from China and the Eurozone that showed softening results ahead of Monday’s open. Later today, at 2:45 p.m. CT, New York Fed President John Williams and Chicago Fed President Charles Evans each speak. They are both 2021 Fed voters.
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