Markets stabilize after worst fall in stocks in months
U.S. equity futures indicated a rebound on Tuesday, after major indices fell on Monday amid concerns over the spread of Covid-19 variants and potential setbacks in the economic recovery.
Futures contracts linked to the Dow Jones Industrial Average rose 0.7%, suggesting a reversal of the blue chip index which fell more than 700 points on Monday in its worst session since October. S&P 500 futures were up 0.5% and Nasdaq 100 futures were up 0.5%, indicating a turnaround for both the broad index and tech stocks.
Investors have become concerned about the Delta coronavirus variant, which has led to a reassessment of the outlook for the economy. Despite this, the three major stock indices only closed around 3% each from their all-time highs on Monday, underscoring the strength of the recovery that fueled stock markets in the first half of the year.
“When you get a massive sell off like the one yesterday, there will definitely be investors who see this as an opportunity to invest for the longer term,” said Kiran Ganesh, multi-asset strategist at UBS Global Wealth Management. “Especially where the 10 years [Treasury] the returns are gone, this still indicates the default position for investors as long stocks, as there are simply very few other options. ”
In bond markets, the yield of the benchmark 10-year US Treasury Index edged up to 1.200%, after falling to 1.181% on Monday in the largest daily decline since March. Prices go up when yields go down. The WSJ Dollar Index hovered around its highest level since March, up 0.1%.
Oil prices have also risen after falling on Monday over fears Covid-19 could once again dampen energy demand. Brent crude added 0.3%, after falling 6.8% in its worst daily performance since March. The US benchmark West Texas Intermediate also rose 0.3%, after registering its largest decline since September.
“We sometimes forget that when we’ve had periods of really strong performance and low volatility, the little bumps in the market make it look like they’re bigger than they are,” said Shaniel Ramjee, manager of multi-asset funds at Pictet Asset Management.
Profits season is underway, tobacco giant Philip Morris International and insurance company Travelers Companies are expected to report ahead of the opening bell. Netflix,
Chipotle Mexican Grill and United Airlines are expected to post profit after markets close.
Cryptocurrencies continued their decline, with bitcoin falling below $ 30,000 on Tuesday for the first time in a month. It is down nearly 3% from its 5 p.m. ET level the previous day to around $ 29,800.
Overseas, the pancontinental Stoxx Europe 600 grew by 0.9%. Among European equities, UBS climbed 2.6% after posting better-than-expected profits for the second quarter, driven by strong client activity and growth markets. Mining giant BHP Group rose 2% after reporting strong quarterly operations.
In Asia, most major benchmarks extended Monday’s declines. The Shanghai Composite Index lost another 0.1% and the Hong Kong Hang Seng fell 0.8%.
A US housing starts gauge for June is expected to be released at 8:30 a.m. ET. Economists expect the rise as prices for materials such as lumber have fallen amid limited supply of homes on the market.
Write to Anna Hirtenstein at [email protected]
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