S&P 500, Nasdaq Futures Point To Higher Open As Steep Declines Bring In Bargain Hunters: Analyst Says Market Entering 'Fire And Ice Part Deux'

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U.S. index futures point to a firmer start on Wall Street on Tuesday, as the market opens after Monday’s Labor Day holiday. With the market trading at the lowest level since mid-July, bargain hunting in beaten-down quality names could offer some support to the market. That said, caution could continue to remain the undercurrent.

Stocks declined in the past week, with apprehensions ahead of Friday’s non-farm payrolls report and the U.S. government move to restrict AI chip sales to China serving as dampeners.

U.S. Indices’ Performance In Week Ended Sept. 2
Index Performance (+/-)   Value
Nasdaq Composite -4.21%   11,630.86
S&P 500 Index -3.29%   3,924.26
Dow Industrials -2.99%   31,318.44

All the three major averages are now at their lowest level since July 18, and the S&P 500 index has extended its losses to three straight weeks, marking the longest streak of losses since mid-June, when the market began turning the corner.

“With the Fed emphatically dashing hopes for a dovish pivot, we think that asset markets may be entering ‘fire and ice part deux,'” Morgan Stanley equity strategist Michael Wilson said in a note over the weekend.

In contrast to part one, seen in the first half, this time the decline in stocks would come mostly via a higher equity risk premium and lower earnings, the analyst said. He is of the view the decline in the next-twelve-month S&P 500 earnings is far from over.

“In short, part deux will be more icy than fiery, the opposite of 1H22.”

Here’s a peek into index futures trading:

U.S. Futures’ Performance On Tuesday During Premarket Session
Index Performance (+/-)  
Nasdaq 100 Futures +0.80%  
S&P 500 Futures +0.74%  
Dow Futures +0.66%  
R2K Futures +0.42%  

In premarket trading on Tuesday, the SPDR S&P 500 ETF Trust (NYSE:SPY) was rising 0.70% to $394.98 and the Invesco QQQ Trust(NASDAQ:QQQ) was moving up 0.73% to $297.33, according to Benzinga Pro data.

Two service sector readings are among the key Main Street data scheduled to be released on Tuesday. The results of the S&P service sector survey for August and the composite purchasing managers’ index, or PMI, are due at 9:45 p.m. ET.

At 10 a.m. ET, the Institute for Supply Management will release its service sector PMI for August.

See also: Will The S&P 500 Finish Higher In 2022? Here’s What Analysts Predict

Stocks In Focus

On the corporate front, meme stock Bed Bath & Beyond, Inc. (NASDAQ:BBBY) is plunging nearly 16% after its CFO Gustavo Arnal died by suicide on Friday.

  • A report suggesting Digital World Acquisition Corp. (NASDAQ:DWAC) will unlikely get shareholder nod for a one-year extension in the deadline for the consummation of the SPAC deal with Donald Trump’s company that owns Truth Social is sending its stock down by about 18%.
  • Apple, Inc. (NASDAQ:AAPL) stock will likely see brisk trading ahead of Wednesday’s “Far Out” launch event, where it is expected to unveil its new iPhone and Watch models.
  • New Jersey-based retinal diseases-focused biopharma Iveric bio, Inc. (NASDAQ:ISEE) is advancing strongly on a positive late-stage readout for its geographic atrophy treatment candidate.

Commodity, Global Markets:

After remaining firm in the Asian hours, WTI crude oil futures were seen trading lower in New York trading.

The major Asian markets closed a lackluster trading session on Tuesday on a mixed note for want of trading cues. The Australian market ended moderately lower after the Reserve Bank of Australia raised key rates by 50 basis points to 2.35%, in line with expectations. Chinese stocks, meanwhile, advanced notably as the nation’s central bank continue to signal an accommodative monetary policy stance.

European stocks opened higher and are firm in morning trading, with the German DAX Index leading the gains in the region. German factory orders continued to slide, underlining recession risk. The data could be construed as positive ahead of Thursday’s European Central Bank’s monetary policy meeting to discuss interest rates.