US equities futures rose, pointing to a partial rebound in major indices after the S&P 500 closed in a bear market for the first time since 2020.
S&P 500-linked futures gained 0.5% after the broad market index fell 3.9% on Monday. Nasdaq-100 futures rose 0.7%, suggesting an increase in technology stocks after the opening bell. Dow Jones Industrial Average futures rose 0.3%.
Global equities have come under pressure in recent weeks over concerns that major central banks will have to move more aggressively than expected to fight inflation. The latest release of consumer price data in the US further fueled these fears, as they rose from 8.6% in the previous month to a four-decade high. The S&P 500 has been down for the past four consecutive trading sessions, losing more than 10%. The index is down almost 22% from its all-time high.
“It wouldn’t necessarily read much in a kind of mini-investment. Things went awry and now people will just wait for the Fed,” said Colin Graham, Robeco’s head of multi-asset strategy.
The Federal Reserve will issue a monetary policy decision on Wednesday, following a two-day meeting. The Wall Street Journal reported Monday that policymakers are considering a surprising 0.75 percentage point rise in interest rates.
According to Graham, it is likely that some investors will make a bargain after such a sharp fall in the markets. “At some point yesterday, all S&P 500 stocks fell. As long-term investors, we look for value as long as the economic damage isn’t too great.”
Investors are struggling to accept the powerful forces of the market: rising inflation eroding consumers’ purchasing power and the prospect of a recession that could hurt the company’s profits and lead to the failure of weaker firms. An indicator of the bond market, the difference in the yield curve between public debt at two and ten years, was briefly reversed overnight, warning that there could be a recession. In the European morning, it rose to 0.021 percentage points.
The U.S. yield curve last reversed in April, when short-term Treasury yields rose more than long-term ones with the expectation that the Fed could raise rates at a brisk pace. after a strong employment report.
Bond markets were generally more stable on Tuesday. The yield on the 10-year Treasury benchmark fell to 3.299% from 3.371% on Monday, reversing direction after four consecutive days of gains. Prices go up when yields go down. Short-term bond yields also fell, with a two-year decline to 3.265% from 3.279% the previous day, after their biggest two-day jump since the week after Lehman Brothers collapsed. according to an analysis by Deutsche Bank.
The May Producer Price Index, a measure of inflation for domestic producers, will be released at 8:30 am ET. Economists predict an increase over the previous month.
While many markets have come under pressure this year, the rate hike has had a particularly significant effect on the shares of companies that lost money that was previously estimated by the pandemic and other speculative bets. Higher interest rates on safe haven assets such as government bonds tend to reduce the relative attractiveness of riskier investments and the perceived value of future cash flows, while increasing the costs of corporate lending.
“I don’t think we’re going to see anything like a V-shaped recovery,” Rick Pitcairn, investment director at Pennsylvania’s Pitcairn multifamily office, said about the stock market. “The way we rebuild will be quieter; it won’t go straight back to high speculation.”
In pre-market trading, business software company Oracle rose more than 13% after reporting a quarterly increase in sales that exceeded analysts’ expectations, driven by its IT division in the cloud.
Abroad, the pan-continental Stoxx Europe 600 fell 0.3%. Shares of French IT firm Atos fell 27% after its CEO resigned and the company said it plans to split its big data and security division.
In the Asia-Pacific trading, Australian stocks caused losses after the market reopened after a holiday. Sydney’s S & P / ASX 200 index was down 3.5%, its biggest one-day drop in more than two years.
Shanghai’s composite index rose 1%, while Hong Kong’s Hang Seng index fell 0.1%. Japan’s Nikkei 225 fell 1.3%.
The Japanese yen remained flat, near the weakest level of the dollar in 24 years, which reached on Monday.
Bitcoin, the largest cryptocurrency, has come under pressure after selling hard in recent days. It traded at about $ 22,725 on Tuesday, losing another 2.3%. It has dropped 67% from its all-time high.
In raw materials, Brent crude, the world’s leading oil company, gained 0.6%.
Write to Dave Sebastian at dave.sebastian@wsj.com
Shares in Asia remained under pressure on Tuesday.
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