Falling Yields and Oil Give Stocks Relief, but Key Risks Remain

Stock futures are stabilizing and looking flat to slightly positive after early pressure eased as oil and Treasury yields pulled back from overnight highs. The relationship remains pretty simple right now: when yields and oil move higher, stocks struggle, and when both come down, risk assets get some relief.

The latest ADP private sector employment report showed about 37,000 jobs added, roughly in line with expectations and possibly slightly weaker. It gives us one more look at the labor market before Friday’s nonfarm payrolls report and the Federal Reserve meeting on September 16. Markets currently favor a slight probability that the Federal Reserve will raise rates rather than leave them unchanged.

The U.S. 10 Year Treasury Yield (US10Y) is still one of the most important things to watch. It briefly moved above 4.8% overnight, which is major resistance from the January 2025 high, but it has since moved back below that level. I am less concerned about an intraday move above 4.8% than I am about a daily close with confirmation above it. If that happens, the next major level is 5%, which lines up with the October 2023 high.

As long as 4.8% continues to hold as resistance, yields could pull back, and that would likely help stocks. The S&P 500 Index (SPX) fell about 0.7% in the previous session, but it is still holding above the important 7,570 pivot. As long as 7,570 holds, the market structure remains bullish. A break below it would move the outlook to neutral.

What is interesting is that the S&P 500 Index is still only about 3% below its all-time highs even with the 10 Year Treasury Yield around 4.8% and oil near $90 per barrel. If yields ease toward 4.7% and oil pulls back toward $85 or even $80, stocks could have room to move back toward the highs.

The U.S. Dollar Index (DXY) continues to grind higher, but the larger chart has already broken its previous trend line, so the broader setup still favors an eventual move lower. That could be supportive for gold and potentially Bitcoin.

The Japan 10 Year Government Bond Yield (JP10Y) reached 3.03% overnight before coming back to about 3%. The daily candle is developing a long upper wick around that psychological level, which raises the possibility of a pullback in Japanese yields and potentially some relief in U.S. yields as well.

West Texas Intermediate Crude Oil Futures (CL) reached about $92.40 overnight before falling sharply toward $88. That drop happened alongside the move lower in yields and helped stocks recover. Oil previously broke above an important trend line, and $84 to $85 is now the main support area on a pullback.

The problem with oil is that this is still heavily driven by news. Any development suggesting peace or another agreement involving Iran could cause oil to fall $7 to $10 very quickly. Even if $84 to $85 is technically strong support, a failure could still produce another $5 to $10 decline before there is much time to react.

Gold Futures (GC) are responding much better from support. Gold traded as low as $4,280 overnight and recovered toward $4,340. That area also lines up with the 50% Fibonacci retracement of the previous move higher. After such a sharp decline, I still see room for a bounce toward roughly $4,400 to $4,450, although the chart does not yet give us enough information to say whether new highs are coming.

Silver Futures (SI) also returned to an important previous pivot that shifted from resistance into support, so a technical bounce is possible. Natural Gas Futures (NG) also rebounded after a sharp decline. It remains above its bullish pivot, but it still needs to clear the next resistance zone before the upside can really open up.

Now to technology. Broadcom Inc. (AVGO) reports earnings after the closing bell, with options positioning leaning toward an upside move, but price still has to confirm that expectation.

Dell Technologies Inc. (DELL) moved sharply higher in premarket trading after strong earnings and guidance. I do not see a strong day trade level here, but if Dell reaches roughly $515 to $520, that becomes a potential swing short area.

MongoDB Inc. (MDB) fell about 14% after initially moving higher on earnings before weaker guidance changed the reaction. The important level is the gap fill around $370, where a move slightly below that price could create a possible day trade setup.

Credo Technology Group Holding Ltd. (CRDO) also fell sharply. The strongest support zone is between $176 and $168, where a gap fill, previous pivot low, and the 61.8% Fibonacci retracement come together.

Palo Alto Networks Inc. (PANW) has a bigger technical concern developing. The stock is forming a possible head and shoulders pattern, with the neckline around $333 to $335. A daily close below that area could signal additional selling.

Finally, Bitcoin (BTC) is pulling back and has developed a small bear flag, but the larger structure is still intact. The level that matters most is $75,535.59, the August 23 low and the bottom of the recent consolidation. As long as Bitcoin stays above $75,535.59, I am not overly concerned about the current weakness. If that level breaks, the risk of a larger decline increases.

Bitcoin is still being influenced by the same forces affecting other risk assets, especially Treasury yields. For now, the market is giving us very clear levels: 4.8% on the 10 Year Treasury Yield, 7,570 on the S&P 500 Index, $84 to $85 on oil, $4,280 on gold, and $75,535.59 on Bitcoin. The key is to stay patient and let price confirm which of those levels actually holds.