Futures on U.S. stocks strengthened slightly more ahead of Monday’s trading after the stock extended a sharp sell-off that brought all three major indexes to their lowest level ever.
S&P 500 futures rose 0.3% after the benchmark closed below 4,000 for the first time since March 2021, deepening losses due to the longest series of weekly declines since 2011. Dow contracts rose 0.2% after the index cleared over 650 points in the main session, and Nasdaq futures rose 0.3%, retreating from a 4.3% drop in earlier trading.
Meanwhile, the reference 10-year yield on treasury bills was above 3%, the highest level since the end of 2018, and the CBOE volatility index (VIX), a “fear gauge” on Wall Street, jumped above 34, well above its long term average is around 20.
These moves extend the period of recent turmoil in stock markets as concerns about inflation, rising interest rates and the possibility of a slowdown continue to strain investor sentiment.
“The market is currently without significant positive catalysts, so it’s no surprise that we are starting the week under pressure,” Brian Price, head of investment management at the Commonwealth Financial Network, said in a note sent by email.
An additional problem is the weak earnings season, which has raised concerns about how corporate profits will fare amid persistent macroeconomic disruptions. As of Friday, the percentage of S&P 500 companies that exceeded EPS estimates was above the five-year average, but the size of positive surprises was below the five-year average, according to data from FactSet.
“Another catalyst that could cause risk aversion lately is the rather weak earnings season,” Price added. “It has certainly not been as strong as it has been in the past few quarters, and there is even more uncertainty about the future outlook for EPS given the sheer amount of macro uncertainty.”
For this earnings season so far, 87% of companies in the S&P 500 reported actual results for the first quarter from the beginning of the year to Friday, according to the latest available FactSet data. Investors expect even more important reports later this week from big names including Disney (DIS), Peloton (PTON) and Rivian Automotive (RIVN).
In terms of economic data, retailers will also closely monitor the Consumer Price Index (CPI) from Wednesday for the latest picture of the state of inflation in the US. The figure is expected to offer indications of how much more aggressive the Federal Reserve will need to act to mitigate price growth.
“The stock market continues to struggle when the implications of inflation and rising market interest rates on stock prices are taken into account,” John Lynch, chief investment officer of Comerica Wealth Management, said in a note Monday.
“This is a rope walk by the Fed. If it moves too slowly, it risks not lowering inflation and taking root higher inflation expectations – which will make elimination more difficult,” Lynch said. “Conversely, if the Fed raises rates too quickly, it risks tending the economy into recession, with associated job losses and other costs. The Fed really has a difficult task ahead of it.”
18:14 ET Monday: Stock futures rise after the S&P 500 closes below 4,000
Here is where stock futures traded on Monday night:
S&P 500 futures (EN = F): +10.50 (+ 0.26%) to 3,998.00
Dow futures (YM = F): +78.00 (+ 0.24%) to 3,998.00
Nasdaq futures (NQ = F): +42.00 (+ 0.34%) to 12,235.75
Raw (CL = F): -0.30 USD (-0.29%) to 102.79 USD
gold (GC = F): -5.30 USD (-0.29%) to 11,853.30 USD per ounce
10-year vault (^ TNX): -4.4 bps for 3.0790% yield
Alexandra Semenova is a Yahoo Finance journalist. Follow her on Twitter @alexandraandnyc
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