Tolu is a cryptocurrency and blockchain enthusiast based in Lagos. He likes to demystify crypto stories to the bare basics so that anyone anywhere can understand without too much background knowledge. When he's not neck-deep in crypto stories, Tolu enjoys music, loves to sing and is an avid movie lover.
Futures tied to the Dow, as well as other leading indexes, declined early Wednesday as the market rebound fizzled out.
The Dow Jones Industrial Average (DJIA) futures dropped 445 points, or 1.46%, event after the recent market rebound. This discontinuation of a market rebound also also saw notable declines in the other major stock index futures. For instance, the futures contracts tied to the S&P 500 fell 1.7%, while Nasdaq 100 futures declined 1.85%. All leading US stock indexes slipped early Wednesday after the major averages rose during the regular trading session. The rally sustained during regular trading hours was an attempt to knock off some losses after prior weeks of sustained sell offs.
Major Index Market Rebound Preceding Dow Futures, Others Decline
At the regular trading session during the market rebound, the Dow jumped 641 points, or 2.15%, while the S&P surged 2.45%. This was the best outing for the S&P since early May.
Furthermore, the rally for both major indexes also symbolized a marked recovery overall from the worst weekly loss in two years. At the end of that period, the Dow stood at 30,530.25, while the S&P was at 3,764.79. Additionally, the tech heavy Nasdaq Composite was at 11,069.30 after experiencing a substantial 2.51% climb just before the Juneteenth market close.
At the time, Sam Stovall, chief investment strategist at CFRA Research, commented on the major index comeback, saying:
“The outstanding question is whether this is simply a bounce or the bottom. I think that this could certainly be a bounce but not the bottom because the one missing ingredient is a fear-based capitulation sell-off.”
However, Stovall’s comments came amid sustained growing trepidation over a likely economic collapse-induced market recession. For example, only last week, the US Federal Reserve hiked interest rates by a 0.75 basis point, representing its largest increase since 1994. This move is the central bank’s latest attempt to rein in rampant inflation which is at a 40-year high.
Leading Banks Opine on Possible Economic Recession & Looming Inflation
Swiss banking giant UBS suggested that US or global inflation may not happen this year or 2023. However, the multinational investment bank admitted that “the risks of a hard landing are rising”. Furthermore, UBS also stated that the current strength of consumer and bank balance sheets would accommodate ill effects of inflationary. That is, should an economic recession actually occur.
Meanwhile, US banking powerhouse Goldman Sachs has a slightly different economic recession assessment. According to the New York-based multinational investment bank, a recession is growing increasingly likely for the US economy. Goldman Sachs also used definite terms like “higher and more front-loaded,” when describing recessionary risks. Also, in a note to clients, the prominent bank said:
“The main reasons are that our baseline growth path is now lower and that we are increasingly concerned that the Fed will feel compelled to respond forcefully to high headline inflation and consumer inflation expectations if energy prices rise further, even if activity slows sharply.”
Fed Chair Jerome Powell appears set to testify before Congress, beginning on Wednesday and likely lasting two days. Powell’s two-day testimony may direct the Dow futures and major indexes.