Tuesday June 21st


Dow futures surge 400 points as the market tries to recover from a brutal week

U.S. stock market index futures rose in early morning trading Tuesday following a brutal week as investors assessed a more aggressive Federal Reserve and rising chances of a recession. Futures on the Dow Jones Industrial Average jumped 406 points, or 1.4%. S&P 500 futures climbed 1.5%, and Nasdaq 100 futures popped 1.5%. U.S. stock markets were closed Monday for Juneteenth. “There’s not a single reason for the bounce in equities, and the overwhelming view is dismissing the uptick as being nothing more than dead cat, something that should be faded just like all the other rally attempts lately. We push back a little bit on that view, largely because of an approaching inflation shift,” wrote Adam Crisafulli of Vital Knowledge. Crisafulli noted that Brent crude was trading roughly $10 below a recent high, while President Joe Biden gets set for a trip to Saudi Arabia to discuss energy production. He also pointed out that iron ore and copper have fallen recently. “If commodities can stay on a downward trajectory, it would remove a massive overhang from equity markets,” he said. Brent crude futures traded 1.4% higher at $115.75 per barrel. West Texas Intermediate, the U.S. oil benchmark, gained 2.2% to $110.41 per barrel. Major tech stocks that have been pummeled in recent trading rose in the premarket. Shares of Apple, Amazon, Google-parent Alphabet and Meta all climbed more than 1%. Shares of Kellogg jumped more than 7% in premarket trading after the company said it would split into three separate companies. Separately, food company Mondelez increased 1.2% in premarket trading following news that it would acquire energy bar maker Clif Bar in a $2.9 billion transaction. Airline stocks soared in premarket trading amid hopes of a summer travel boom. Shares of Spirit Airlines jumped more than 9% in premarket trading after JetBlue raised its takeover offer to $33.50 a share, even as Spirit deliberates a proposed merger with Frontier Group. JetBlue’s stock price jumped 1.8% in premarket trading. Meanwhile, the yield on the benchmark 10-year Treasury note continued to march higher. Yields move inversely to prices. The major averages suffered their 10th losing week in 11 last week on fears that the central bank will hike rates aggressively to tame inflation at the risk of causing an economic downturn. The S&P 500 dropped 5.8% last week for its biggest weekly loss since March 2020, dipping deeper into bear market territory. The equity benchmark is now more than 23% off its record high from early January. The blue-chip Dow slid 4.8% last week, falling below 30,000 for the first time since January 2021 last week. The tech-heavy Nasdaq Composite slipped 4.8% last week, down 33% from its record high. The steep drop in equities appeared to signify the further weakening in investor confidence in the economic outlook and the Federal Reserve’s ability to navigate a soft landing. Some on Wall Street say that earnings estimates may be the next to fall given the rising probability of an imminent recession. “Even in the event of recession is avoided, the earnings numbers are too high because the inflationary pressure on costs is now squeezing margins, meaning our fire and ice narrative really is playing out to a tee, and we’ve priced a lot of it,” Mike Wilson, chief U.S. equity strategist at Morgan Stanley, said on CNBC’s “Squawk Box” on Tuesday. “We just haven’t priced it fully for the recessionary outcome.” Fed Chair Jerome Powell will testify before Congress Wednesday and Thursday. His appearance comes after a recent rate hike by three-quarters of a percentage point, the central bank’s biggest increase since 1994. Investors will monitor incoming data, including existing home sales on Tuesday, to gauge the health of the economy. Recent data showing low consumer confidence, falling retail spending and a cooling housing market have fueled recession fears as the Fed battles inflation at 41-year highs. Meanwhile, cryptocurrencies continued their roller-coaster ride. Bitcoin fell to a new 2022 low of $17,601.58 over the weekend before climbing back above the $20,000 mark on Monday. The world’s largest cryptocurrency by market cap sits 70% below its all-time high hit in November. Asia-Pacific markets were mostly buoyant on Tuesday while bitcoin continued to rise after a recent rebound. Meanwhile, Australia’s central bank says inflation will peak by the end of the year. Japanese stocks led gains, with the Nikkei 225 trading 1.84% higher to close at 26,246.31, while the Topix also rose by 2.05% to close at 1,856.20. Shares of conglomerate SoftBank Group surged by nearly 3%. Taiwan’s Taiex index also rose more than 2% to finish at 15,728.64. Hong Kong’s Hang Seng index climbed 1.66% as of the last hour of trade, with tech stocks Tencent and Alibaba posting gains of 2.27% and 1.25% respectively. Mainland Chinese stocks struggled for gains, with the Shanghai Composite dipping 0.26% to close at 3,306.71 while the Shenzhen Component sat 0.51% lower at 12,423.86. The Kospi in South Korea was also in positive territory, trading 0.75% higher to finish at 2,408.93. Gold prices eased on Tuesday as headwinds from an uptick in U.S. Treasury yields amid prospects of more interest rate hikes offset support from a retreat in the dollar. Spot gold fell 0.1% to $1,836.12 per ounce by 1006 GMT. U.S. gold futures were flat at $1,839.50.