U.S. Stocks Set To Open Lower As Traders Take Some Profits Off The Table

The Market Takes A Pause After Spectacular Rally

S&P 500 futures are losing ground in the premarket trading session. There is no special catalyst for the decline, and traders are likely taking some profits after S&P 500 rallied from 3000 to 3200 without any pullback.

From a big picture point of view, S&P 500 recovered from mid-March lows near 2200 to the levels seen at the beginning of this year at 3200 in less than three months.

This is a spectacular move, and it is highly likely that even the most bullish investors did not anticipate that the stock market will recover so fast.

Now that stocks are not far from all-time highs, investors and traders will likely search for additional positive catalysts before increasing their purchases at such levels.

U.S. Dollar And Gold Gain Ground

In a sign that the current pullback in S&P 500 is due to decreased risk appetie, U.S. Dollar Index and gold are gaining more ground.

The U.S. Dollar Index is close to the 97 level as it continues its attempts to rebound. The U.S. Dollar Index has finally received support near 96.50 after falling from the 99 level.

Gold is back above the key $1700 level as demand for safe haven assets increases. Given the fact that gold was able to stay above $1700 per ounce despite the historic rally in the equity market, it is highly likely that gold will be the traders’ preferred instrument to hedge against the potential market downside.

In this scenario, a downside move in the equity market will be accompanied by gold’s breakout above $1750 per ounce.

The World Health Organization Reminds That Coronavirus Is Still A Problem

While the markets are focused on the recovery and expect that unprecedented monetary stimulus from the world central banks will provide a major boost to the world economy, WHO reminds that healthcare problems have not evaporated.

The number of coronavirus cases that are registered in the world continues to increase at an alarming rate. According to data from Johns Hopkings University, more than 7.1 million coronavirus cases have been confirmed in the world, and the epidemic is progressing fast in South America and South Asia.

While the U.S. and the EU continue to reopen their economies, the increase in coronavirus cases elsewhere poses risks for recovery as it hurts global travel and trade while increasing risks of a second wave of the disease.

That said, it remains to be seen whether the market will pay any attention to virus data as the general upside trend remains strong.

For a look at all of today’s economic events, check out our economic calendar.