Tuesday June 14th

U.S. stock index futures rose Tuesday, as the market tried to claw back some of Monday’s steep declines that pushed the S&P 500 back into bear market territory. Traders also looked ahead to a key monetary policy announcement from the Federal Reserve later in the week. Dow Jones Industrial Average futures rose 77 points, or 0.25%. S&P 500 and Nasdaq 100 futures climbed 0.37% and 0.68%, respectively. Shares of Oracle jumped 12% in premarket trading after the software company reported an earnings beat boosted by a “major increase in demand” in its infrastructure cloud business. The moves came after an intense sell-off Monday. The S&P 500 slumped 3.9% to its lowest level since March 2021, closing more than 21% below its January record. Monday’s close marked bear market for the S&P 500 since March 2020. During that last bear market, the S&P 500 lost 33.9% before recovering, according to data compiled by S&P Dow Jones Indices. The data also showed that bear markets on average last more than 18 months. Meanwhile, the Dow tumbled 2.8%, putting it roughly 17% off its record high. The Nasdaq Composite dropped nearly 4.7% and is now more than 33% off its November record. Those losses came as expectations grow for the Fed to hike rates more than initially anticipated. CNBC’s Steve Liesman reported Monday that the Fed will “likely” consider a 75-basis-point increase, which is greater than the 50-basis-point hike many traders had come to expect. The Wall Street  Journal reported the story first. Traders now see a more than 90% chance of a 75-basis-point rate hike at this week’s Fed meeting, which concludes Wednesday, according to the CME Group’s FedWatch tool that measures pricing in the fed funds futures markets. That change in Fed policy expectations sent rates surging, with the 10-year rate briefly topping 3.4%on Monday. The benchmark rate eased back to about 3.32% on Tuesday. “The move in the 10-year Treasury yield toward 3.5% shows the market’s fear that the Fed may fall further behind the curve is increasing,” wrote UBS strategists led by Mark Haefele. “In turn, this will give the Fed less room to ‘declare victory’ and ease off on rate hikes. As a result, the risks of a Fed-induced recession have increased, in our view, and the chances of a recession in the next six months have risen.” Wall Street is also expecting the latest reading on the May producer price index on Tuesday before the bell at 8:30 a.m. Shares in Asia-Pacific mostly tumbled on Tuesday after the S&P 500 fell overnight and closed in bear market territory, but mainland Chinese stocks bucked the overall regional trend to recover from earlier losses. The Shanghai Composite closed 1.02% higher at 3,288.91 while the Shenzhen Component climbed 0.204% to about 12,023.79. In Hong Kong, the Hang Seng index swung between positive and negative territory, sitting 0.15% lower in its final hour of trading. Hong Kong-listed shares of Alibaba continued to sit close about 2.7% lower. Most of the other major markets in the region were in negative territory. The Nikkei 225 in Japan fell 1.32% on the day to 26,629.86, while the Topix index shed 1.19% to 1,878.45. South Korea’s Kospi slipped 0.46% to close at 2,492.97. Oil prices rose on Tuesday as tight global supply outweighed worries that fuel demand would be hit by a possible recession and fresh Covid-19 curbs in China. Brent crude futures rose $1.09, or 0.9%, to $123.36 a barrel, while U.S. West Texas Intermediate (WTI) crude rose 96 cents, or 0.77% to $121.89 a barrel. Tight supply has been aggravated by a drop in exports from Libya amid a political crisis that has hit output and ports. Other OPEC+ producers are struggling to meet their production quotas and Russia faces bans on its oil over the war in Ukraine. Gold prices steadied after early losses on Tuesday as a pullback in the dollar provided some respite, but expectations the Federal Reserve will resort to aggressive policy tightening to tame inflation capped gains. Spot gold rose 0.2% to $1,822.98 per ounce, after falling to its lowest since May 19 at $1,810.90 earlier in the session. U.S. gold futures shed 0.4% to $1,824.90 per ounce. The dollar index dipped 0.2% after scaling a near two-decade high on Monday, which sent greenback-priced bullion nearly 3% lower. U.S. benchmark 10-year yields were also off their multi-year high. Gold has been offered some room to breathe as the dollar retreats and yields slip, said FXTM analyst Lukman Otunuga.