US stock futures rose, pointing to muted gains for the major indexes after the S&P 500 closed in a bear market for the first time since 2020.
S&P 500-related futures are up 0.5% after the broad market index plunged 3.9% on Monday. Nasdaq 100 futures rose 0.8%, indicating a moderate rally in technology shares after the opening bell. Dow Jones Industrial Average futures rose 0.4%.
Global stocks have been under pressure in recent weeks on concerns that major central banks will have to move more aggressively than expected to combat inflation. The latest release of data on US consumer prices added to these concerns, rising from the previous month to 8.6% and reaching the highest level in more than four decades. The S&P 500 has fallen for the past four trading sessions in a row, losing more than 10%. The index is down nearly 22% from its last record high.
“I wouldn’t necessarily read much in some sort of mini-reversal. Things have been really oversold and now people are just going to wait for the Fed,” said Colin Graham, head of multi-asset strategy at Robeco.
The Federal Reserve is due to release its monetary policy decision on Wednesday, after a two-day meeting. The Wall Street Journal reported on Monday that policy makers are considering a surprise rate hike of 0.75 percentage point.
Some investors are likely to haggle over shopping after such a sharp drop across all markets, El Sayed said. Graham said. “At one point yesterday, every stock in the S&P 500 fell. As long-term investors, we look for value as long as the economic damage isn’t too great.”
Investors are struggling to come to terms with strong forces in the market: high inflation eroding consumers’ purchasing power, and the potential for a recession that could hurt corporate profits and drive weaker companies into failure. One of the bond market indicators, the yield curve differential between two-year and 10-year government debt, briefly reversed overnight, signaling the possibility of a future recession. It rose in New York morning to 0.025 percentage points.
The US yield curve inverted last time in April, when short-term Treasury yields rose more than long-term ones amid expectations that the Federal Reserve could raise interest rates at a rapid pace after a strong jobs report.
Bond markets were more broadly stable on Tuesday. The yield on the benchmark 10-year Treasury fell to 3.329% from 3.371% on Monday, reversing the trend after four consecutive days of gains. Prices rise when returns fall.
The yield on some short-term bonds rose further, with the two-year bond yield rising to 3.294% from 3.279% the day before. After the biggest jump in two days since the week after the collapse of Lehman Brothers, according to an analysis by Deutsche Bank..
The Producer Price Index, a measure of inflation for domestic producers, rose 10.8% on a 12-month basis in May, down slightly from the previous month.
While many markets have been under pressure this year, higher rates have had a particularly big impact on shares of money-losing companies that were once a pandemic sweetheart and other speculative groups. Higher interest rates on safe assets such as government bonds tend to reduce the relative attractiveness of riskier investments — and the perceived value of future cash flows — while raising corporate borrowing costs.
“I don’t think we’ll see anything like a V-shaped recovery,” Rick Pitcairn, chief investment officer of the multi-family office in Pitcairn, Pennsylvania, said of the stock market. “The way we rebuild will be much more silent — you won’t go straight back to highly speculative stocks.”
In pre-market trading, business software company Oracle jumped 12% after reporting a quarterly sales increase that beat analysts’ expectations, driven by its cloud computing division. Oil producer Continental Resources surged nearly 9% after billionaire Harold Hamm offered to buy shares his family didn’t already own for about $4.3 billion.
Cryptocurrency exchange Coinbase fell 7% before the bell after it said it would cut its workforce by about 18%. JPMorgan lowered its target price for the stock.
Bitcoin remains under pressure after a sharp sell-off in recent days. It traded at around $22,150 on Tuesday, and lost another 5%. It’s 68% lower than its last record high.
Offshore, the Stoxx Europe 600 Continental Index was down 0.6%. Shares of French information technology company Atos fell 24 percent after its chief executive resigned and the company said it plans to separate its big data and security division.
Bonds issued by the Greek government, one of the weakest European economies, were sold. The 10-year yield rose to 4.607%, the highest level since November 2018.
In Asia-Pacific trading, Australian shares led losses after the market reopened after a holiday. Sydney’s S&P/ASX 200 surveyed 3.6%, its own The biggest one-day drop in percentage terms in more than two years.
The Shanghai Composite Index is up 1%, while the Hang Seng Index in Hong Kong closed unchanged. Japan’s Nikkei 225 index fell 1.3%.
The Japanese yen has changed little, hovering near the dollar’s weakest level in 24 years, which it reached on Monday.
In commodities, Brent crude, the global oil standard, rose 1.4% to trade at $123.90.
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