The U.S. stock market faced a dramatic decline in the month of September, due to concerns about the Fed’s rate hike and the global economic slowdown. However, U.S. stock futures rallied in early trading on Tuesday.
U.S. Equity Futures
Nasdaq futures are up 1.6%, while S&P 500 futures are up 1.42%. Similarly, futures on the Dow Jones Industrial Average are up 1.27%, or 379 points. The surge in stock futures comes after five consecutive days of negative index closes.
On Monday, the Dow fell more than 300 points while the S&P 500 closed at its 2022 lows. Since the beginning of 2022, both indexes have fallen more than 20%, putting them in an official bearish zone.
The recent round of selling pressure on U.S. equities comes in the context of several factors. First, the Fed is committed to bringing down inflation by taking a hawkish stance with interest rate hikes. The U.S. central bank will continue its rate hikes this year at the November and December meetings.
Wall Street is even more concerned that the Fed’s six-month battle against inflation could push the U.S. economy into recession. In addition, the currency market and the rising dollar index also point to bigger problems.
On Monday, the British pound hit its lowest level against the US dollar. On this subject, Max Gokhman, CIO at AlphaTrAI, said:
“Typically, U.S. investors wouldn’t care too much about something like this, and especially more recently. To me, this means that fear is gripping investors much more than it used to. That will lead to a moment of capitulation where we’re really down.”
Oil prices recover after hitting new lows
On Monday, the price of oil hit a new low in January 2022, at $86 per barrel. However, it recovered in early trading on Tuesday.
Earlier in the day, West Texas Intermediate crude oil futures gained 1% to $77.50 a barrel. Similarly, global benchmark Brent crude oil gained 1.5 percent to trade at $85.19 a barrel. The recent price recovery has been supported by supply reductions in the Gulf of Mexico.