Futures for U.S. equities were substantially higher on Tuesday morning as the market attempted to recover from a bear market for the tech-heavy Nasdaq and a 19 percent decline for the S&P 500.
Futures contracts associated with the Dow Jones Industrial Average increased by more than 300 points, or 1.1%. S&P 500 futures increased by 1.4%, while Nasdaq 100 futures rose by 1.8%.
After weeks of heavy losses, the market made its last attempt at a recovery on Tuesday. The S&P 500 just ended its longest losing streak since 2011: six weeks. The Dow has declined for seven consecutive weeks, its largest weekly decline since 2001. The S&P 500 and Dow are down 15.9 percent and 11.3%, respectively, since the beginning of the year.
Vital Knowledge’s Adam Crisafulli noted that investors were pleased by three consecutive days of very typical and boring price activity in US markets, a stark contrast to the previous weeks.
Several equities rose in premarket trade on Tuesday. Citigroup shares rose 5% in premarket trading after a report disclosed that Warren Buffett’s Berkshire Hathaway increased its stake in the troubled bank by over $3 billion in the first quarter.
In the past year, Citi shares have underperformed the rest of the financial industry, falling roughly 40 percent while the Financial Select Sector SPDR Fund has declined 12 percent over the same period.
Other bank stocks rose in response to the Citi news. During premarket trade, shares of Bank of America and JPMorgan Chase climbed 1 percent.
As a result of increased consumer demand, United Airlines lifted its revenue projection for the second quarter, which boosted travel stocks in the premarket. The stock price of United Airlines increased by 4 percent, Delta’s by 3 percent, and American Airlines’ by 3 percent.
The premarket price of Home Depot shares increased by more than 3 percent after the home improvement store reported quarterly results that exceeded expectations. The company has boosted its outlook for the entire year.
During premarket trade, semiconductor stocks increased. Following an upgrade by Piper Sandler, shares of Advanced Micro Devices increased by more than 3 percent. The firm stated that the company appeared appealing after plunging 34.5 percent this year. Nvidia’s stock price increased 3%, Qualcomm’s gained 2.4%, and Micron Technology’s increased 2%.
In the meantime, Walmart shares fell more than 5 percent in premarket trading following the retail giant’s earnings loss due to inflationary pressures. The corporation increased its projection for sales, but decreased its outlook for profits.
Investors will also await remarks from Federal Reserve Chairman Jerome Powell, who will appear at a Wall Street Journal conference at 2:00 p.m. ET on the central bank’s strategy to combat inflation.
On the economic front, retail sales figures matched expectations. In April, retail sales increased by 0.9%, according to the U.S. Census Bureau. They increased 0.4% excluding vehicle expenditures.
Concerns over inflation have been a growing headwind for stocks, with some investors fearing that the economy may ultimately enter a recession.
“We see clear late-cycle indicators, and while the risk of economic growth contraction or recession has risen steadily over the first four and a half months of this year, we are now beginning to cross over a probability threshold that makes recession a base case for the end of this year and the beginning of next,” Darrell Cronk, president of the Wells Fargo Investment Institute, wrote in a Monday note.
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The company noted that it should eventually be a “very minor and brief economic growth decline.”
The S&P 500 and the Nasdaq Composite both lost 0.4% and 1.2%, respectively, after a volatile trading session that just concluded. Meanwhile, the Dow had a modest increase on Monday.
UBS stated in a client note on Monday that the poor performance of tech and growth businesses this year is somewhat of retribution for the outstanding returns these market categories have previously enjoyed.
Since then, the tailwinds of the pandemic — an increase in at-home spending and cheap interest rates — have become headwinds. Currently, consumer spending is moving and interest rates are increasing.
UBS stated, “While we believe that long-term interest rates have reached their peak, for now, growth equities remain pricey relative to value companies.”