The dollar index rose on Tuesday, reversing previous losses as renewed doubts over the durability of the US-Iran ceasefire revived demand for the currency. Risk appetite deteriorated after President Donald Trump rejected Tehran's latest proposal and warned that the ceasefire was "on life support," raising fears that tensions could intensify again.
Three forces are pinning implied volatility to the floor. Geopolitical risk that drove the March spike, including the war in Iran and Strait of Hormuz disruptions, has been partially priced in as oil prices fell back below $100. Rates are the second anchor: the 10-year Treasury yield sits at 4.4%, in the 88th percentile of the past year, with traders watching whether the long bond mounts a sustained push above 5%. The third is earnings season delivering enough beats to keep dip-buyers engaged.
The dollar stabilised to a certain extent today after retreating in the prior session, but could remain relatively volatile as markets react to geopolitical developments in the Middle East. Treasury yields were firmer following a pullback on Monday as well.
The metal has come under pressure as rising geopolitical tensions have pushed energy prices higher, reinforcing concerns about inflation and tightening financial conditions. This has resulted in a rise in US Treasury yields to multi-week highs, weighing on non-yielding assets such as gold.
Futures are trading lower as many across Wall Street breathed a semi-sigh of relief yesterday after oil futures, which shot up to $120 overnight, retreated below $100 on Monday. That was the biggest spike in oil pricing since 2020. With the retreat in the black gold, the major indices did a massive midday turnaround.
The expectations of a decrease in tensions triggered a pullback in oil prices, which in turn softened immediate concerns about inflation pressures. However, the broader geopolitical backdrop remains fragile, and any renewed escalation could quickly push oil prices, the dollar, and Treasury yields higher again.
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Futures are trading higher after a wild Wednesday that saw the market rally hard on the open on the non-farm payrolls print that blew away estimates, despite a significant decline in government jobs. However, the "buy the rumor, sell the news" cliche came in fast and strong, quickly turning the rally into a big sell-off. While stocks rallied off late-morning lows, all major indices ended the day just modestly lower.
In addition, if the January consumer price index number, to be posted on Friday, comes in below expectations, there may be no rate cuts until the summer, if then. The best move for growth and income investors seeking solid passive income is to start adding top companies now, as interest rates will rise with no help from the Federal Reserve.
Futures are trading mixed this morning after a dreadful day across Wall Street, with all major indices closing lower except the Russell 2000. What began in late December and has gained considerable traction recently is the narrative of a broad rotation out of technology stocks. For the last three years, technology stocks, led by the Magnificent 7, have marched the S&P 500 to three consecutive years of double-digit gains.
