US stock index futures opened slightly higher as traders bought up the index by Wednesday's regular session's end. S&P 500 futures were up 0.2%, while the tech-heavy NASDAQ gained about 0.3%. The dollar index retreated after hitting its monthly peak. Meanwhile, Europe's Stoxx 600 index dipped 0.3%.
Oil prices, nearing $100 a barrel, are in the spotlight. This fuels expectations that interest rates will remain elevated, pressuring global equity markets. US benchmark oil stabilized after momentarily surpassing $95 a barrel, with Brent crude hovering around $97. A recent dip in US reserves highlighted a growing global deficit.
Against this backdrop, concerns about inflation kept 10-year Treasury yields around 4.6%, the highest level since 2007. A combination of surging oil prices and rate hikes spells trouble for stock markets. Today, all eyes are on Federal Reserve Chairman Jerome Powell, scheduled to speak later. Last week, Powell hinted that even though rates were near peak, they would remain high longer than previously indicated. Hawkish statements from other Fed officials contributed to yesterday's market sell-off. Powell's stance today will influence any market correction.
Meanwhile, Minneapolis Federal Reserve President Neel Kashkari warned that a potential US government shutdown and the impact of an auto industry workers' strike could slow the economy, necessitating less aggressive central bank actions. "If these downside scenarios hit the US economy, we might then have to do less with our monetary policy," he noted.
However, hawkish remarks from other central bank officials dashed hopes for an imminent rate cut, making September grim for stocks and many global bonds.
Today, GDP data and unemployment claims are anticipated, potentially triggering market volatility.
There is also a risk of more sell-offs in the market. Just look at a significant option position held by JPMorgan Chase & Co. Protective contracts owned by the bank, amounting to tens of thousands, are set to expire tomorrow at a strike price just below the current S&P 500 index level, suggesting potential for further market upheavals.
As for the S&P 500, the demand for the index remains weak. Bulls need to take control of $4,304 if they want to stop the bear market. From this level, they can push the price to $4,332. Bulls also should take control of $4,357, restoring the market balance. If the index declines on the back of decreasing demand for risk appetite, bulls will have to protect $4,268. Breaking through this level, the trading instrument may return to $4,229 and $4,202.
