Monday ended with one of the worst US stock market sessions in months. The Dow Jones Industrial Average index fell more than 700 points, marking its worst day since October, while the S&P 500 fell 1.6 percent and the Nasdaq Composite fell 1.1 percent.
Today U.S. index futures appear to be rising in an attempt to recover from Wall Street's sharp sell-off in the previous session. Investors were focused on the second-quarter earnings season. IBM reported better-than-expected results and posted its biggest revenue increase in three years (total sales revenue increased 3 percent in Q2 2021 to reach $18.75 billion). Today, we will also hear reports from Netflix Inc and Philip Morris International.
What are investors afraid of?
However, fears of slowing global economic growth persist in the markets. They are caused by the rapid spread of the COVID-19 delta variant, which may lead to restrictions. Airlines and cruise operators may still face problems as a result of concerns about travel restrictions. The U.S. Centers for Disease Control and Prevention has urged Americans to avoid travel to the United Kingdom.
Another concern for investors relates to the actions of central banks. Faced with rising inflation, they may tighten monetary policy earlier than expected. These institutions are faced with a difficult choice: whether to support growth through loose monetary policy or to start putting the brakes on price growth.
Oil amid demand concerns and decisions to increase production
Volatility emerged in the oil market, where the price of a barrel of WTI chugged more than 8 percent on Monday as OPEC+ agreed to increase production and the Delta COVID-19 option worsened prospects for a recovery in fuel demand.
After an initial setback and opposition from the United Arab Emirates, OPEC+ decided on Sunday to increase total oil production by 400,000 barrels per day starting in August 2021. The cartel also agreed on new production allocations for several members from May 2022, including the United Arab Emirates, Saudi Arabia, Russia, Kuwait, and Iraq.
WTI crude oil futures were hovering around $67 a barrel this morning, the lowest level in nearly two months and well below this year's highs around $77 a barrel.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
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