American stock futures retreated on Monday as investors focused on the ongoing war in Israel and the potential for higher interest rates in the US. Futures tied to the Dow Jones crashed by 170 points while those linked to the S&P 500 and Nasdaq 100 fell by over 60 basis points.
US equities crashed as the US dollar index (DXY) and crude oil jumped. The US dollar index rose by 45 basis points to $106.25 while Brent and West Texas Intermediate (WTI) crude oil soared to $88 and $86.20, respectively. Other commodities like gold, silver, and copper prices have soared.
At the same time, US bond yields continued rising. The 10-year Treasury yield jumped to 4.75% while the 30-year jumped to 4.96%. These yields rose as traders reacted to the strong US non-farm payrolls (NFP) data. The data revealed that the economy added over 330k jobs in September while the unemployment rate rose to 3.8%.
As a result, the fear and greed index dropped to 26 and is approaching the extreme fear region of 25. Key parts of the index like safe-haven demand, put and call options, stock price breadth and stock price strength have moved to the extreme fear zone.
At the same time, the market momentum and market momentum has moved to the fear zone. Only the junk bond demand metric is at the extreme greed zone.
Fear and Greed Index chart
Defense contractors and energy companies were among the best-performing companies on Monday. As I wrote here, companies like Raytheon, Lockheed Martin, General Dynamics, and Northrop Grumman stock prices jumped in the pre-market session.
Similarly, oil and gas companies like ExxonMobil, Chevron, and Shell jumped as the price of crude oil jumped.
Still, it is worth noting that American stocks tend to do well after the initial war tantrums. For example, the S&P 500 and Nasdaq 100 indices have rebounded even as the war in Ukraine continued. They also thrived after the US invaded Afghanistan.
Looking ahead, the next key catalysts for the indices will be the upcoming Federal Reserve minutes scheduled for Wednesday and inflation set for Thursday. Economists polled by Reuters expect the data to show that the headline consumer price index (CPI) fell to 3.6% in September.
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