S&P 500 and Nasdaq 100 Futures Rebound After Monday’s Sell-Off

Futures Rebound After Market Tumble

S&P 500 futures rose by 0.8% on Tuesday after the broad index experienced its worst day in nearly two years, driven by global market sell-offs. Nasdaq 100 futures gained 1.0%, and Dow Jones Industrial Average futures increased by 0.62%, or 229 points. The rebound was aided by a surge in Japanese stocks, with the Nikkei 225 rising 10.2%, its best day since October 2008, following a 12.4% decline on the previous day, marking its worst day since 1987.

Impact of Monday’s Sell-Off

Monday’s trading session saw significant drops amid economic concerns. The Dow Jones Industrial Average fell by 1,033.99 points, or 2.6%, while the S&P 500 declined by 3%. The Nasdaq Composite dropped by 3.4%, deepening its correction. This downturn was partly fueled by the unwinding of the yen “carry trade” after the Bank of Japan’s interest rate hike, which increased the yen’s value and affected traders borrowing in yen to purchase global assets.

Key Stock Movements

Uber reported better-than-expected second-quarter results, with earnings per share at 47 cents, surpassing the expected 31 cents, and revenue at $10.7 billion, beating the forecasted $10.57 billion. The stock rose about 4% in pre-market trading. Uber’s mobility unit saw a 23% increase in gross bookings, while delivery bookings rose 16%. For the third quarter, Uber forecasts bookings of $40.25 billion to $41.75 billion, slightly below the average estimate but projects adjusted earnings between $1.58 billion and $1.68 billion.

Yum Brands reported mixed results, with earnings per share at $1.35, slightly above the expected $1.33, but revenue at $1.76 billion, missing the expected $1.8 billion. Same-store sales for Pizza Hut and KFC fell by 3%, with KFC’s U.S. sales shrinking by 5%. However, Taco Bell’s same-store sales increased by 5%, helping to offset some of the declines.

Alphabet shares fell more than 4% after a federal judge ruled that Google has illegally maintained a monopoly in search and text advertising markets, violating the Sherman Act. The decision marks the first significant antitrust ruling against a tech company in decades, with the court finding that Google’s exclusive search arrangements on Android and Apple devices cemented its dominance.

Investor Sentiment and Market Analysis

Quincy Krosby, LPL Financial’s chief global strategist, highlighted that the sell-off was a correction of previously overextended valuations and bullish positioning. Many investors viewed Monday’s decline as a necessary adjustment in an overheated market, with further volatility expected. Keith Lerner, Truist’s co-chief investment officer, suggested that while the market’s risk/reward profile is improving, it is too early to declare a market bottom, noting that the recovery process may be protracted.

Fed’s Stance on Interest Rates

San Francisco Federal Reserve President Mary Daly indicated potential interest rate cuts later this year, contingent on incoming economic data, particularly regarding inflation and labor market trends. Daly emphasized the importance of not letting the labor market weaken excessively. Concurrently, Chicago Fed President Austan Goolsbee remarked that the current restrictive rates policy may be inappropriate if the economy shows signs of stress, signaling potential adjustments by the Fed to support economic stability.

Market Forecast

Given the recent sell-off and subsequent partial recovery, the market is expected to remain volatile in the short term. The S&P 500 futures’ slight rise suggests cautious optimism among traders. However, ongoing economic concerns and potential Fed policy changes will likely continue to influence market movements. Investors should brace for potential fluctuations as the market recalibrates to new economic realities.

Traders are advised to monitor economic indicators and Fed announcements closely, as these will play a crucial role in shaping the market’s direction in the coming weeks.

Technical Analysis

E-mini S&P 500 Index futures are edging higher on Tuesday, but remain inside yesterday’s wide range. The key upside target is the pivot at 5360.50. This level is controlling the near-term direction. Look for sellers on the initial test of this level since the short-term trend is down.

Based on Monday’s price action, the key support is the 200-day moving average at 5142.00. The market penetrated this level yesterday, falling to 5120.00. However, the index picked up strength after it regained the 200-day MA.