Friday morning, and the market feels like it’s exhaling. As of 8:30am CT, stock futures are pointing to a higher open, with Dow E-minis up 162 points, or 0.31%, and S&P 500 E-minis up 23.75 points, also 0.31%, while Nasdaq 100 E-minis are up 188 points, or 0.61%, per Reuters at 5:15am ET. Investopedia’s live tracker has futures for the Dow and S&P 500 each up nearly 0.4% in recent trading, with Nasdaq futures up 0.7%.
Here’s the scene we’re walking into. Yesterday was a tug of war that ended roughly where it started: the Dow closed down 161.61 points, or 0.3%, at 51,349.98, marking its third straight down day, while the S&P 500 edged down just 1.90 points to 7,704.13 and the Nasdaq inched up 3.34 points to 26,939.37, essentially flat. It was the kind of session that tells you the market is holding its breath, not panicking, not celebrating.
The weekly scorecard still matters, though. The S&P 500 and Nasdaq enter Friday up 0.7% and 1.6% for the week respectively, while the Dow is down 0.6%, on pace for its fourth consecutive weekly loss. And here’s the part that should make you sit up: both the S&P 500 and Nasdaq are little more than 1% away from record highs, even with all the storm clouds overhead. Citi’s strategists told clients they’re “impressed how well the equity market has been trading in the light of higher oil, higher rates, and poor seasonals in September,” and they’re staying invested while patiently waiting for a pullback to add risk (MarketWatch).
The relief this morning has two fathers. First, Treasury yields are easing: the 10-year yield recently sat near 5.19%, down about two basis points from Thursday’s close, though it is still up about 18 basis points on the week and hit its highest level since 2007 yesterday. Second, oil is backing off: West Texas Intermediate prices are down 2% to $92.70 a barrel, while Brent crude is 1.3% lower at $105.20. That matters because, as Investopedia notes, oil has been trading between $90 and $100 lately amid the lack of progress toward ending the Iran war, and expensive crude eventually shows up in everything you buy.
Overnight, Asia was a study in contrasts. Japan’s Nikkei rose 1%, while Hong Kong’s Hang Seng skidded 1% and Australia’s resources-heavy shares fell 0.6%, with Chinese mainland, Taiwan, and South Korea markets closed for holidays. Japan’s financial stocks led the way, with Mitsubishi UFJ up 2.5% and Mizuho up 3.1%, as investors rode the wave of rising global bond yields. Europe woke up in a better mood: the pan-European STOXX 600 rose 0.7% to 640.66 points by 0704 GMT, on course for its first weekly advance after three consecutive weekly losses, with airlines like Ryanair and Lufthansa each gaining more than 2% on cheaper fuel. Currency markets: the dollar is flirting with 159 yen, and gold futures are up more than 1% to $4,347 an ounce while bitcoin trades near $84,900, recovering from yesterday’s lows of $82,900.
What to watch next: the big question hanging over this Friday is whether the thaw in oil and yields holds through the weekend. Reuters reported Thursday that the U.S. and Iran discussed a phased reopening of the Strait of Hormuz, and any progress there would be the fastest route to sustained relief. With the S&P and Nasdaq sniffing record highs despite 5%+ yields and $100+ oil, this market is telling you something: it wants to rally. It just needs permission.
