US equities futures rose, pointing to silenced gains in major indices after the S&P 500 closed in a bear market for the first time since 2020.
S&P 500-linked futures rose 0.5% after the broad market index fell 3.9% on Monday. Nasdaq-100 futures rose 0.8%, suggesting a moderate increase in technology stocks after the opening bell. Dow Jones Industrial Average futures rose 0.4%.
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 morning in New York, it rose to 0.025 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 3.329% from 3.371% on Monday, reversing direction after four consecutive days of gains. Prices go up when yields go down.
The yield on some short-term bonds rose further, with the two-year rise to 3.294% from 3.279% the previous day, after its biggest two-day jump since the week after Lehman’s collapse. Brothers, according to an analysis by Deutsche Bank. .
The producer price index, a measure of inflation for domestic producers, rose 10.8% in 12 months in May, a slight decline from 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.”
As markets react to rising interest rates and the threat of a recession, stocks are moving closer to bear market territory. Gunjan Banerji of WSJ explains what it takes to return stocks to a bullish market and why it is difficult to predict when they will return. Illustration: Jacob Reynolds
In pre-market trading, enterprise software company Oracle rose 12% after reporting a quarterly increase in sales that exceeded analysts’ expectations, driven by its cloud computing division. Oil producer Continental Resources rose nearly 9% after billionaire Harold Hamm offered to buy shares his family does not yet own for about $ 4.3 billion.
Coinbase cryptocurrency platform fell 7% ahead of the bell after saying it will reduce its workforce by 18%. JPMorgan reduced its target share price.
Bitcoin remained under pressure after selling strongly in recent days. It traded at about $ 22,150 on Tuesday, losing another 5%. It is 68% below its last all-time high.
Abroad, the Stoxx Europe 600 pancontinental fell 0.6%. Shares of French computer firm Atos fell 24% after its CEO resigned and the company said it plans to split its big data and security division.
Bonds issued by the Greek government, one of Europe’s weakest economies, were sold. The 10-year yield rose to 4.607%, the highest level since November 2018.
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 3.6%, its biggest one-day drop in more than two years.
Shanghai’s composite index grew 1%, while Hong Kong’s Hang Seng index closed flat. Japan’s Nikkei 225 fell 1.3%.
The Japanese yen fluctuated slightly, nearing the weakest level of the dollar in 24 years, which reached on Monday.
In commodities, Brent crude, the world’s leading oil company, gained 1.4% to trade at $ 123.90.
Write to Anna Hirtenstein at anna.hirtenstein@wsj.com and Dave Sebastian at dave.sebastian@wsj.com
Shares in Asia remained under pressure on Tuesday.
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