Gold, U.S. stock futures plunge amid hopes for rate hike and soaring dollar

On Tuesday persistent jitters about what’s seen as an inevitable U.S. rate hike this year unsettled stock futures and pushed the dollar to new records, which also weighed on commodities and overseas equities.

Losses extended in the morning, with futures for the Dow Jones Industrial Average DJH5 sliding 155 points, or 0.9%, to 17,818, while those for the S&P 500 index SPH5 lost 17.5 points, or 0.8%, to 2,059.6. Futures for the Nasdaq-100 NDH5 tumbled 34.25 points, or 0.77%, to 4,380.2.

The S&P 500 index SPX rose 0.4% to 2,079.43. On Monday Wall Street finished modestly higher, and the day marked the sixth anniversary of Wall Street’s bull market, but nonetheless ended below last week’s record levels. 

Analysts at J.P. Morgan remain constructive on U.S. equities, which they note look expensive relative to history and similar to late-cycle levels, but aren’t so on a country-relative basis.

“The U.S. trades at a 2.4 times premium on price/earnings (next 12 months) basis relative to its 10-year history, whereas the U.K. and eurozone trade at 4.5 times and 3.8 times, respectively. Further, equities still look attractive on a cross-asset basis, given the current yield environment and few attractive investment alternatives,” said the team of strategists led by Dubravko Lakos-Bujas.

On Tuesday the dollar surged against the euro EURUSD and the Japanese yen USDJPY as investors increasingly took stock of diverging monetary and economic conditions across the U.S., Europe and Japan. Jitters are also setting in ahead of the March 17-18 Federal Open Market Committee meeting.

Also on Tuesday, gold prices GCJ5 were down about $6 to $1,160.30 an ounce, as strength in the dollar dulled demand for the dollar-denominated metal.

In other markets, The Nikkei 225 NIK  finished 0.7% lower, despite a weaker yen, which in the past has proved a boost for stocks and exporters. Stocks fell amid reports that the Basel Committee on Banking Supervision may ask banks to raise capital, as MarketWatch reports.

Chinese stocks dropped after data showed China’s wholesale deflation worsened in February.

European stocks SXXP fell into the red, tracking losses for stock futures. Greece debt talks between Athens and its international creditors will resume on Wednesday. Strength in the dollar weighed on commodity stocks in Europe, acting as a drag on equities.