Dow poised for slight bounce after Monday’s gut-wrenching reversal

Stock-index futures on Monday were set to open slightly higher on Tuesday, a day after the Dow Jones Industrial Average staged an ugly reversal to end the session with a triple-digit loss, partly on the back of tariff worries. Comments President Donald Trump made during a late-Monday interview gave investors some hope that the president is ready to make a deal to ease trade tensions with China.

However, fears about global growth and peak earnings continued to linger.

How did major benchmarks fare?

Futures for the Dow YMZ8, +0.31% were up about 78 points, or 0.3%, at 24,510, those for the S&P 500 index ESZ8, +0.39% were gaining 9.2 points, or 0.4%, at 2,653. Nasdaq-100 futures NQZ8, +0.32% were gaining 17.5 points, or 0.3%, at 6,754.3

On Monday, the Dow DJIA, -0.99% shed 245.39 points, or 1%, to close at 24,442.92. At its session low, it was down 566 points, and was up as much as 352 points at its intraday peak. The S&P 500 index SPX, -0.66% slid 17.44 points, or 0.7%, to 2,641.25 and the Nasdaq Composite Index COMP, -1.63% dropped 116.92 points, or 1.6%, to 7,050.29.

What is driving the market?

Stocks have entered a decidedly more volatile phase of trade, fueled by myriad concerns, with doubts about the health of the global economy chief among them.

Moreover, shares of companies that have done the most to help drive the U.S. stock market to repeated highs have come off the rails. So-called FAANG names, the acronym referring to technology and internet-related giants Facebook Inc. FB, +0.53% Amazon.com Inc. AMZN, -0.85% Apple Inc. AAPL, +0.35% and Netflix Inc. NFLX, +0.13% and Google-parent Alphabet Inc. GOOGL, +0.32% were all trading sharply lower for October. Amazon.com Inc., on Monday, fell into bear-market territory, wiping out about $120 billion in market value.

The tech-heavy Nasdaq is in correction territory, defined as a drop of at least 10% from a recent peak, while the Dow and S&P 500 are both flirting with tumbling into correction for the second time in 2018.

The market may take a modicum of relief from President Donald Trump’s late-Monday comments during a Fox News interview, which have been attributed to offering stocks some buoyancy, but the president didn’t appear to suggest that any deal was imminent. During a Monday interview with Laura Ingraham of Fox News, Trump said that the U.S. “will make a great deal with China and it has to be great, because they’ve drained our country.”

Stock losses on Monday accelerated after a Bloomberg report indicated that Trump’s administration is prepared to announce tariffs on remaining Chinese imports if talks next month between Trump and Xi Jinping don’ yield results.

Markets were also digesting a raft of quarterly corporate results. About 430 companies are slated to report results on Tuesday, according to FactSet data.

What stocks were in focus

Shares of General Electric Co. GE, -0.54% were rising in premarket action after it slashed its dividend and reported disappointing third-quarter results but announced a restructuring of its power business.

Shares of Coca-Cola Co. KO, +1.16% rose in premarket trade Tuesday, after the beverage and snack giant reported third-quarter earnings and revenue that topped expectations.

Pfizer Inc.’s stock PFE, -3.52% fell before the bell Tuesday, after the pharmaceutical giant reported third-quarter earnings that beat expectations but revenue that missed, and provided a downbeat revenue outlook.

Separately, Chesapeake Energy Corp. CHK, -11.29% were in focus after it announced that it would acquire WildHorse Resource Development Corp. WRD, +7.76% in a cash-and-stock deal valued at $4 billion.

What are analysts saying?

The futures are pointing to a bounce at the opening after yesterdays swings, suggesting another similar session is in the makings. Nevertheless, we think we are getting very close to the end of the correction,” wrote Peter Cardillo, chief market economist at Spartan Capital Securities, in a Tuesday research note.

We look for consumers confidence to slip as the markets decline impacts putting the index at 132. Weaker home prices are expected as the S&P Case-Shiller index rises a slim 0.2%.”

What data were in focus?

After the opening bell, the Case-Shiller home price index for August is set to be released at 9 a.m. Eastern Time. At 10 a.m., reports on consumer confidence for October and home ownership are scheduled.

How were other markets trading?

Asian markets finished higher on the day, European stocks were mostly lower as the Stoxx Europe 600 SXXP, +0.00% traded off 0.1% but the U.K. FTSE 100 UKX, +0.24% climbed 0.2%.

Oil futures CLZ8, -0.88% looked set to extend their losses. Gold GCZ8, -0.33% traded lower, while the U.S. dollar DXY, +0.23% weakened.

 

/marketwatch.com

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