US futures
Dow futures 0.5%, S&P 500 futures 0.52% & Nasdaq futures 0.6%
European futures
FTSE 0.24%, DAX 0.6%
- US stocks are rising, supported by rallying AI and tech
- Oil prices and Treasury yields are easing, supporting risk sentiment
- S&P 500 and the Nasdaq 100 rise to fresh record highs.
- Oil falls as Middle East supply tops pre-war levels
U.S. Stocks Reach Record Highs as Yields and Oil Prices Fall
U.S. stocks are opening higher, with the S&P 500 briefly hitting an all-time high amid optimism surrounding AI trade and hopes of strong corporate earnings, boosting tech stocks. At the same time, oil prices are falling, pulling Treasury yields lower.
Optimism around the AI trade and expectations for strong corporate earnings have helped boost U.S. stocks. The tech-heavy Nasdaq rose to a record trading high on Friday and has hit another record high today. The tech sector has also helped the S&P 500 reach a new record, while the Dow Jones continues to underperform.
Also supporting the move higher are cooling Treasury yields, which have pulled back from multi-year highs as oil prices have fallen.
The 10-year Treasury yield has pulled back to 5.25% after reaching 5.35% yesterday, its highest level since 2002. The 30-year Treasury yield has also slipped to 5.64%, having touched a 2002 high of 5.70% yesterday.
Following last week's unexpected nonfarm payroll report, expectations for a rate hike in October have eased to just 22%, down from 70% around 10 days ago. However, a rate hike in December remains largely priced in.
Attention will turn to four Fed officials, including New York Fed President John Williams, who is speaking later. This comes ahead of tomorrow's release of the FOMC minutes.
Third-quarter earnings season also kicks off next week, with earnings expected to jump more than 30% year on year, thanks largely to AI-related stocks.
Corporate Movers
Constellation Energy and Alphabet are in focus, with Constellation Energy jumping more than 6% after Google announced a major long-term power agreement with the company.
Lennar and Berkshire Hathaway are also in focus after Berkshire disclosed that it had purchased 2.4 million shares in Lennar.
AMD is up 2% after Citi lifted its price target to $800, signalling 26% upside from Monday's close, with the bank citing stronger CPU demand driven by Meta's Muse AI agent.
S&P 500 Forecast – Technical Analysis
The S&P 500 has broken out of its triangle pattern and is testing resistance at 7,810, the record high. With buyers supported by the RSI above 50, a sustained break above this level would bring 7,900 into focus, followed by the psychological 8,000 level.
Support on the downside is seen at 7,760, followed by trendline support around 7,700. A break below 7,620, the June high and October low, could see selling pressure gain traction towards 7,500, the September low.
FX Markets – Dollar falls, EUR/USD rises
The U.S. dollar is falling, tracking Treasury yields lower amid reduced expectations for a Federal Reserve rate hike this month following last week's softer-than-expected nonfarm payroll report. Markets are pricing in around a 22% probability of an October hike, with the FOMC minutes released tomorrow the next major catalyst for the USD.
EUR/USD is rising amid a weaker U.S. dollar and as French bond yields fall, easing some concerns about stress in the eurozone debt market. French debt has been hit particularly hard in recent weeks amid political struggles to cap the budget deficit ahead of the 2027 election. Falling oil prices have helped French bond yields ease, providing some support to the euro.
GBP/USD is also rising amid a weaker U.S. dollar, despite UK construction activity remaining in contraction. The S&P PMI for construction rose to 46.1 in September from 44.3 in August, its highest level since January, but remained below the 50 mark separating growth from contraction. Falling gilt yields are also offering some support to sterling.
Oil Prices Fall as Middle East Exports Recover
Oil prices are falling around 2% on Tuesday amid rising Middle Eastern crude exports and following a G7 emergency stockpile release, which together have eased supply concerns.
Flows of oil from the Gulf, excluding Iran, jumped to more than 81% of pre-war levels in September. Saudi Arabia's energy minister said oil pumped through the East-West pipeline reached 5.8 million barrels a day.
The data suggests that, for now, more crude is getting out of the region, easing fears over supply disruptions even as the conflict in the Middle East continues.
Further supply concerns were eased after G7 countries agreed on Friday to release 100 million barrels of oil from emergency reserves.
For markets, the combination of falling oil prices, lower Treasury yields and reduced expectations for an October Fed hike is creating a supportive backdrop for equities, particularly the technology sector. The key question is whether easing yields can continue to offset the pressure from elevated bond yields and sustain the S&P 500's move above record highs.
