S&P 500 futures extend recovery above 3,740 as risk-on profile strengthens further

• S&P 500 futures have extended their recovery above 3,740 as the quarterly earnings season kicked off.
• BOFA released stellar earnings led by upbeat NII numbers.
• The risk profile is cheerful despite escalating recession fears in the US.
• The DXY has surrendered the critical support of 112.00 with sheer selling pressure.

Global markets are displaying a stellar performance following positive cues from US markets. S&P500 futures have extended their gains after a cheerful Monday, which has infused fresh blood in the global indices. The 500-stocks basket futures have extended their gains above 3,740 after surpassing the critical hurdle of 3,720. The risk-on sentiment has strengthened further as 10-year US Treasury yields have dropped further towards 3.97%.

US markets displayed a V-shape recovery on Monday after a bloody Friday as quarterly earnings season kick-started with a bang. Bank of America (Bofa) came out with decent earnings growth supported by upbeat Net Interest Income (NII).

The US dollar index (DXY) has surrendered the round-level support of 112.00 as the positive market sentiment has trimmed the safe-haven’s appeal. The odds of a bigger rate hike by the Federal Reserve (Fed) are still solid as the CME FedWatch tool displays 99% chances in favor of the fourth consecutive 75 basis points (bps) rate announcement.

Meanwhile, recession fears in the US economy have advanced after negative commentary from J.P. Morgan on financial instruments. Strategists at J.P. Morgan cited that they are cutting back on their delivery longs in equities and trimming their underweight position in bonds due to increased risk that central banks will make a hawkish policy error, reported Reuters. Returns on bonds are scaling higher as the Fed will continue its ultra-hawkish stance despite a slowdown in the inflation rate for several months.