U.S. equity futures moved modestly higher Tuesday, potentially lifting the S&P 500 from its lowest closing level since March of last year, as investors look to tame a three day sell-off on Wall Street that wiped away trillions in value from global stock portfolios.
With growth concerns intensifying amid China’s ongoing Covid crisis, and bets on a series of Federal Reserve rate hikes holding firm in the face of the fastest inflation in forty years, markets are caught in a vice of stagflation worries that is being compounded by a surge in market volatility, which has taken the the CBOE’s VIX index, also known as Wall Street’s ‘fear gauge’, to the highest levels since early March.
Those factors helped induce last night’s selling on Wall Street, which pushed the S&P 500 below the 4,000 point mark for the first time since March of 2021 as the benchmark’s year-to-date decline extended to around 16.3%.
Mega-cap tech stocks such as Apple (AAPL) – Get Apple Inc. Report, Microsoft (MSFT) – Get Microsoft Corporation Report and Tesla (TSLA) – Get Tesla Inc Report weighed on both the S&P 500 and the Nasdaq, which is now down more than 27% from the all-time peak the benchmark reached in mid-November.
Tuesday’s session, however, could see dip buyers setting a floor for markets all over the world, with global stocks rebounding from a two-year low in the overnight session and Europe’s Stoxx 600 rising just over 1% in early Frankfurt trading.
“Since mega-cap tech companies generate elevated levels of cash flow, they will likely benefit from any market stabilization,” said Richard Saperstein, chief investment officer at New York-based Treasury Partners. “Mega-cap tech companies have the financial flexibility to reward shareholders with dividends and stock buybacks given their low levels of debt, which is particularly attractive in a stressed financial landscape.”
However, with the VIX still trading firmly above the 30-point mark — and last seen 9.8% higher at 33.15 points — and a host of Fed speakers out in the field during today’s trading session, including Cleveland Fed President Loretta Mester, Atlanta Fed President Raphael Bostic and New York Fed President John Williams, the early pre-market gains may struggle to hold throughout the trading session.
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Save-haven trading, which lifted the U.S. dollar index to s fresh 20-year high on Monday, eased in overnight dealing, although investors continued to favor U.S. Treasury bonds, taking the yield on benchmark 10-year notes to just over 3%, a near 20 basis point rally from early Monday levels.
Bitcoin prices rebounded modestly as well, after briefly falling below the $30,000 mark in overnight trading, as the world’s biggest cryptocurrency looks to reverse five consecutive days of losses and an exodus of investor cash.
Bitcoin, which is down more than 53% from its late November highs, traded as low as $29.940.50 each in European dealing, extending its May decline to around 20%. The moves have also put nearly half of its investors — around 40% — under water, according to data from research group Glassnode.
Still, for the moment at least, futures contacts tied to the Dow Jones Industrial Average indicating a 205 point opening bell gain while those linked the S&P 500, which is down 16.3% for the year, are priced for a 29 point move to the upside. Futures linked to the tech-focused Nasdaq are looking at a 140 point opening bell gain.
In terms of individual stocks, Peloton Interactive plunged more than 17% after it posted a wider-than-expected third quarter loss as the fitness equipment maker continues to struggle with the turnaround plans of new CEO Barry McCarthy.
Tesla shares pared gains after data from China showed a sharp slowdown in sales and exports from its Shanghai gigafactory and reports suggested the country’s Covid crisis has shuttered production once again.
Twitter (TWTR) – Get Twitter, Inc. Report shares extended declines after analysts at Hindenburg Research, a noted short-seller, cautioned that Elon Musk’s takeover bid could be ‘repriced’ if the Tesla CEO threatens to walk away from the $44 billion deal.
AMC Entertainment (AMC) – Get AMC Entertainment Holdings, Inc. Class A Report, meanwhile, jumped 4% after the movie theatre chain posted a huge increase in first quarter ticket sales thanks in part to success of films such as The Batman” and “Spider-Man: No Way Home”.