Stock futures rebound after S&P 500’s worst day in four months

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MARKET SNAPSHOT

U.S. stock futures were moving higher on Wednesday, following the worst selloff for the S&P 500 in roughly four months, as surging bond yields spooked investors.

How are stock-market futures trading?

  • Dow Jones Industrial Average futures rose 0.5% to 34,364
  • S&P 500 futures gained 0.6% to 4,371
  • Nasdaq-100 futures gained 0.8% to 14,888

On Tuesday, the Dow Jones Industrial Average fell 569 points, or 1.63%, to 34,300 and the S&P 500 declined 90 points, or 2.04%, to 4353, its worst daily percentage drop since May 12, according to Dow Jones Market Data. The Nasdaq Composite dropped 423 points, or 2.83%, to 14547.

Read: Only 47 stocks in the S&P 500 have fallen over the past year — Wall Street predicts they will climb up to 54% in 12 months

What’s driving the market?

Wednesday’s rise in stock futures came as surging bond yields appeared to ease off off slightly, though the yield on the 10-year Treasury remained near the highest levels since June, at around 1.5% compared with 1.31% a week ago. The yield reached 1.534% on Tuesday.

Yields began their ascent last week, following a Federal Reserve meeting that indicated the central bank was poised to begin backing away from its accommodative policy put in place to help the economy cope with the pandemic.

Surging yields pushed investors to press the sell button, notably on rate-sensitive technology and other growth-related names, though companies geared to the economic cycle also saw losses. Federal Reserve Chairman Jerome Powell said Tuesday that some of the supply-side bottlenecks behind the surge in inflation have “gotten worse.”

Opinion: U.S. consumers are gloomy about their finances and that means a recession could be near

While investors looked ready to buy some beaten-down equities on Wednesday, they remain wary as Democrats and Republicans are deadlocked over a funding package needed to prevent a government shutdown.

Read: House’s No. 2 Democrat says lawmakers considering bill that would just prevent government shutdown

Read: What happens if the U.S. defaults on its debt?

In an update sent to Congressional leaders on Tuesday, Treasury Secretary Janet Yellen said Congress must raise or suspend the debt limit by Oct. 18.

“Investors are also troubled by the fact that we have arrived at this point where

Washington lawmakers are responsible for important financial and economic

outcomes when they have been challenged to find common ground on any issue over the last number of years,” said Alex Chaloff, co-head of investment strategies at Bernstein Private Wealth Management

“While the debt ceiling negotiation will likely reach a resolution, we all have to be prepared for it to go to the 11th hour and be extremely messy along the way. Investors like certainty. Investors like resolution. Today, this issue has neither,” said Chaloff, in emailed comments.

Wednesday will be busy on the central bank front, with Powell appearing at a European Central Bank conference panel at around 11:45 a.m. Eastern, alongside Christine Lagarde, president of the European Central Bank, Bank of Japan Gov. Haruhiko Kuroda and Bank of England Gov. Andrew Bailey.

Read: Warren calls Powell ‘a dangerous man,’ and says she won’t vote to give him another four-year term

On the data front, pending home sales for August are due at 10 a.m. Eastern.

Which companies are in focus?

  • Shares of Micron Technology Inc. fell 3% in premarket trading after a disappointing earnings forecast from the chip maker late Tuesday.
  • Shares of Lucid Group Inc. rose 9% in premarket after the electric-vehicle maker on Tuesday showed off its first cars said it would deliver them to customers starting late next month.

How are other assets trading?

  • Oil futures continued to pull back after the first loss in six sessions on Tuesday. with the U.S. benchmark down around 1% to $74.58 a barrel. International benchmark Brent was off a similar amount to $77.60.
  • In European equites, the Stoxx Europe 600 index rose 0.7%, following the biggest percentage decline since July 19. Asian equities were mostly lower across the board, with the Nikkei 225 index dropping 2% and China’s CSI 300 index dropping 1%.
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