On a fair value basis, Dow Jones futures rose 1.4%. S&P 500 futures increased 1.55% and Nasdaq 100 futures increased 1.6%. A 4-basis point rise was seen in the yield on the 10-year Treasury bill. Crude oil prices increased by 2%. Natural gas futures dropped by 6%.
In observance of Juneteenth, the U.S. stock market was closed Monday, but other stock exchanges in other parts of the world were open.
Chris Waller, chairman of the Federal Reserve, said Saturday that he favors another rate hike of 75 basis points at the final Fed meeting of this month. Currently, markets expect a high likelihood of it, though it hasn’t fully been priced.
Read After Hours Dow – Everything You Need to Know.
The Fed is raising rates and reducing its balance sheet simultaneously. However, St. Louis Fed President James Bullard said Monday the central bank does not have to tighten up as much as some assume.
The overnight action in equities and other markets does not necessarily translate into actual stock market trading the next day.
The Dow jumps in the wake of the worst week in over two years for stocks
After a holiday-shortened week, trading began to move upward as oil prices and other commodities began to rebound, increasing investor optimism and raising the likelihood of a near-term recession.
Despite some gains Tuesday, the benchmark Brent crude remains about $10 below its recent high. Gas prices have dropped below $5 a gallon, providing some relief. Copper and iron ore prices have also declined. Similarly, Vice President Joe Biden will visit Saudi Arabia this week to discuss improving energy production.
To curb inflation, the Federal Reserve raised interest rates by three-quarters of a percentage point last week, the most significant hike in 28 years. Despite the tepid retaliation from stocks, U.S. stocks still managed to log significant losses last week. According to Jerome Powell, the U.S. Federal Reserve chairman, lowering inflation might be possible without dampening the economy.
“What’s becoming more evident is that there are many factors beyond our control that will significantly impact whether or not we succeed,” he said.
This was the worst week on record for the S&P 500 since 2020, with the index losing almost 6% on the week. Approximately 5% of the Dow fell.
This week, the Fed is once again at the center of attention. As part of his semi-annual testimony to Congress about the Federal Reserve, Powell will appear on Wednesday before the Senate Banking Committee and Thursday before the House Financial Services Committee. Since investors have little else to go on in economic data or earnings, they are likely to base their thinking on the testimony.
A more than 20% drop in U.S. stocks has brought the market into a bear market since January 3, when it hit a record high. But stocks may still fall further, particularly if the U.S. economy enters a recession as predicted by economists.
Investors have suffered during recessions. A bear market during a recession has historically been longer and more intense than a bear market that wasn’t related to an economic downturn, according to Sam Stovall, a chief investment strategist at CFRA Research. Bear markets have fallen 28% without recessions since World War II – and 36% during recessions.
