Tuesday September 21st

21-09-2021

Dow futures rebound more than 200 points following Monday’s big sell-off

U.S. stock index futures bounced on Tuesday as investors bought the dip following the S&P 500′s worst day since May. Futures on the Dow Jones Industrial average rose 218 points, or 0.6%. S&P 500 futures and Nasdaq 100 futures rose 0.5%. Asian markets were stable overnight, helping sentiment in the U.S. after fears grew Monday that the liquidity crisis at Chinese developer Evergrande would lead to a global contagion. Hong Kong’s Hang Seng Index rose 0.5% after dropping more than 3% on Monday. “There has already been a sharp bounce off Monday’s intraday low and the catalysts for the correction have yet to be resolved, so we would expect a bit more indigestion and begin adding risk back into the market on any further weakness as the bottoming process begins,” Canaccord Genuity analyst Tony Dwyer said in a note Tuesday. On Monday, the S&P 500 slid 1.7% for its worst day since May 12. The Dow Jones Industrial Average plummeted 614 points, or 1.8%, for its biggest one-day drop since July 19. The Nasdaq  Composite shed 2.2%. Stocks linked to global growth that led Monday’s sell-off were bouncing in premarket trading Tuesday. Nucor steel was up 1.8% in premarket trading. Copper miner Freeport-McMoRan added 3%. Chipmakers, banks and energy stocks were also bouncing. Uber shares jumped 5% after raising its outlook for the third quarter. The Federal Reserve begins its two-day policy meeting on Tuesday and investors are looking for more information from Chairman Jerome Powell about the central bank’s plans to taper its bond buying, specifically when that will happen. Powell said last month that he sees the Fed slowing its $120 billion in monthly purchases at some point this year. The Fed releases its quarterly economic forecasts, the so-called dot plot, along with the statement on interest rates at 2 p.m. ET Wednesday. Powell will have a press conference after the announcements. ″We’re going to have to see proof that the Fed dot plots don’t come out in a way that spooks the market,” said said Yung-Yu Ma, chief investment strategist at BMO Wealth Management. Struggling real estate developer China Evergrande Group teeters on the brink of default and is due to pay interest worth $83 million this Thursday, according to S&P Global Ratings. Analysts largely believe Evergrande will miss the interest payment and S&P sees a default as “likely.” “We’re going to have to see some proof that the Chinese government is taking steps to manage this,” Ma added. Also weighing on markets is the delta variant, which remains a global health threat as the colder months approach and vaccination hesitancy persists among some Americans. Johnson & Johnson said on Tuesday that its Covid vaccine booster shot is 94% effective. Stocks linked to global growth led losses on Monday and energy names took a hit thanks to a 2% drop in U.S. oil prices. Banks stocks dropped as bond yields fell. The Cboe Volatility index, Wall Street’s fear gauge, jumped above the 26 level on Monday, the highest since May. Investors are also concerned about the deadline to raise the debt ceiling and possible tax increases. Congress returned to Washington from recess rushing to pass funding bills to avoid a government shutdown. September is a historically volatile month for stocks and after the S&P 500′s 16% rally year-to-date, many investors have said the market is due for a pullback. Some strategists called Monday’s sell-off a buying opportunity. “The market sell-off that escalated overnight we believe is primarily driven by technical selling flows ([commodity trading advisors] and option hedgers) in an environment of poor liquidity, and overreaction of discretionary traders to perceived risks,” Marko Kolanovic, JPMorgan chief global market strategist, said in a note Monday. Others said volatility is likely to persist until some of the risks are resolved. “We’re not in the camp that this small pullback represents a special buying opportunity,” said Ma. “There could easily be more volatility depending on what happens with the Fed meeting...similar with the debt ceiling. With the overhang and then negotiations, this is definitely going to be pushed to the wire.” FedEx, Adobe, AutoZone and Stitch Fix report quarterly earnings on Tuesday. Shares in Asia-Pacific were mixed on Tuesday as investors continued monitoring the situation surrounding embattled developer China Evergrande Group. Japanese stocks declined as they returned to trade following a Monday holiday. The Nikkei 225 closed 2.17% lower at 29,839.71 as shares of conglomerate Softbank Group plunged 4.98%. The Topix index shed 1.7% on the day to 2,064.55. Markets in mainland China and South Korea were closed on Tuesday for a holiday. Oil prices rose on Tuesday, after sharp losses the previous session, amid tighter U.S. supplies, ending days of losses as global markets remain haunted by the potential impact on China’s economy of a crisis at heavily indebted property group China Evergrande. Brent crude gained 67 cents, or 0.9%, to trade at $74.59 per barrel, having fallen by almost 2% on Monday. The October West Texas Intermediate (WTI) contract, which expires later on Tuesday, was up 73 cents, or 1%, at $71.02, after dropping 2.3% in the previous session. The more active November contract gained $1.01 a barrel to $71.15. Gold prices held steady on Tuesday, buoyed by a subdued dollar, although price action was limited as investors awaited the U.S. Federal Reserve policy meeting for more clarity on its tapering plans. Spot gold was little changed at $1,764.46 per ounce at 0907 GMT, while U.S. gold futures were up 0.1% to $1,765.00 per ounce.