By Sara Sjolin, MarketWatch
Dollar falls to September lows
Wall Street was set for a slightly higher open on Tuesday, with stock futures cautiously rising as traders returned from the New Year's holiday.
With only one major economic data release on deck on Tuesday, investors instead turned their attention to the continued dollar slump and geopolitical concerns over Iran and North Korea.
What are stock futures doing?
Futures for the Dow Jones Industrial Average rose 63 points, or 0.3%, to 24,800, while those for the S&P 500 index gained 7.50 points, or 0.3%, to 2,683.50. Futures for the Nasdaq-100 index added 20.25 points, or 0.3%, to 6,429.
The small moves come after all three benchmarks declined on Friday in 2017's last trading session . The indexes, however, still scored stellar gains for the year, with the S&P 500 ending 2017 19.4% higher, the Dow average rising 25.1% and the Nasdaq Composite climbing 28.2%. All three posted their best year since 2013.
What's driving the market?
A sinking dollar has grabbed the limelight to start 2018, kicking off the new year the same way it ended, slumping.
The ICE U.S. Dollar Index fell for a fifth straight session, down 0.3% at 91.886 to trade around its lowest level since September. The weakness came as investors expressed doubts that major U.S. tax reforms written into law late December would have on economic growth, interest rates and inflation.
Outside the U.S., Iran was in focus after nine people were reported dead after overnight clashes between protesters and security forces. The protests started last week over rising inflation and corruption, but focus has since shifted to a wider discontent with Iran's ruling system and Supreme Leader Ayatollah Ali Khamenei. The wave of unrest is now seen as the largest since a disputed 2009 presidential election.
In North Korea, leader Kim Jong Un said in a speech on Monday that Pyongyang had completed its nuclear weapons program , which could reach any point in the continental U.S. Kim, however, also suggested he is willing to engage in talks with South Korea, saying North Korea would be open to sending a delegation to the Winter Olympics in the South next month.
The government in Seoul welcomed Kim's suggestion on Tuesday. Its unification minister proposed holding high-level talks with North Korean officials on Jan. 9 to discuss the country's possible involvement in the Winter Games and Kim Jong Un's nuclear program.
What are strategists saying?
"Given how futures are positioned ahead of the open, it would appear we're going to see a continuation of the holiday trade of recent weeks, in which indices have traded in a tight range at record highs," said Craig Erlam, senior market analyst at Oanda, in emailed comments.
"Futures appear to have taken little direction from Asian or European trade, with indices simply paring Friday's losses. A break below 24,700 in the Dow and 2,670 in the S&P may trigger some near-term downside but broadly speaking, investors appear very optimistic which should continue to be reflected in equity markets," he added.
"It seems that the initial market excitement witnessed during early Q4 of 2017 over U.S. tax reforms has diminished, while concerns remain elevated over stubbornly low inflation levels," said Lukman Otunuga, research analyst at FXTM, in a note.
"Although sentiment remains bullish towards the U.S. economy amid the improving economic conditions, investors seem more concerned with tax reforms and rate hike expectations. While the dollar was initially supported by the prospect of tax cuts being implemented, bulls may take a pause as investors investigate whether the cuts will lift growth materially in the longer run," he added.
Which stocks are in focus?
Shares of Abbott Laboratories(>> Abbott Laboratories) rose 2.9% ahead of the bell after J.P. Morgan lifted the health care company to overweight from neutral.
Netflix Inc.(>> Netflix) put on 1.8% after Macquarie lifted the online-streaming company to outperform, according to Dow Jones Newswires.
Incyte Corp. (>> Incyte Corporation) climbed 1.1% before the open after RBC Capital Markets raised its rating on the biotech company to outperform from sector perform.
Cabot Oil & Gas Corp.(>> Cabot Oil & Gas Corporation) fell 1.8% premarket after Raymond James cut the energy company to underperform from outperform.
What economic updates are ahead?
On a light economic calendar, the U.S. manufacturing purchasing manager's index for December is the only major report scheduled for release. The data are due to come out at 9:45 a.m. Eastern Time.
There are no Federal Reserve officials scheduled to speak publicly.
What are other markets doing?
Stock markets in Asia closed mainly higher, while European equity markets kicked off the new year on the back foot.
Oil prices declined, with West Texas Intermediate crude falling from its highest level since June 2015 that was reached on Friday.
Metals were mixed. Gold prices rose 0.3%, while copper fell 0.4%.
Bitcoin futures lost 4.8% to $13,780.